It's cookie-based for now...
As several people have rightly pointed out, this seems cookie based, so it's easy to disable without having to accept an opt-out cookie. At the URL linked from the article, I get the message
"Your browser's cookies seem to be disabled. Ads Preferences will not work until you enable cookies in your browser."
All well and good. As long as Google doesn't switch to tracking by IP.
So: how long are ISPs going to allow broadband customers to get a new IP address every time they want one? My DHCP lease is over a week long, and I'm not convinced that my ISP wouldn't just give me the same IP back again even if I did switch my cable modem off long enough. Certainly that's what it does if I deliberately release and refresh.
With sites like Wikipedia blocking by IP address, customers are going to be less and less impressed with the idea that their ISP has given them a ropey, pre-owned IP address that some vandal or unsuspecting bot-owner has managed to get banned from half the web. Prior to IPv6, the only solution is one IP address per customer, and if you break it, tough luck.
Once Google can rely on one household per IP address (at least within blocks it knows are residential ISPs), then why *wouldn't* it target ads by IP, in cases where cookies are blocked? Sure, you conflate a small number of users, and advertise tellytubbies to Dad and porn^Hcars to the kids, but it's still better than no targeting at all.
That's why log anonymisation matters, at least for those not already using TOR. Your IP address either already is personally identifying information, or will be soon.