Peter N

A website owner creates a webpage with a space for an advert and then signs up to allow Phorm to provide adverts on their website. This space normally shows a normal untargetted from one of Phorm's customers. Targetted ads are only displayed if an opted-in customer with an existing profile visits that website in which case a specific ad in shown instead. (In theory at least as it's not clear what advert you'll see if Phorm don't have a contract with a source that suits your internet usage - how many antique dealers or dog grooming parlours will sign up, for example)

Basically non-opted in customers see the website in exactly the same way as customers from non-Phorm using ISPs. No profiling is used or required.

It helps to separate the profiling and the ad-serving in your mind then you'll see that the webpages will have to work for all internet users regardless of whether or not they are profiled by Phorm.

The profiling and ad-serving systems are totally separate. In fact they are physically separate as the profiling is done by equipment within the ISPs hardware while the ad-serving is dealt with externally.