Is it done by majority vote or does one instance have more control than others cough cough lemmy world cough if so then this is not really federated is it and with each instance we now have basically upgraded mod power to admin power so one more question is each instance independently monetized?
To support the instance. Hosting costs money. Having an advert toggle could be a good way of making it work without forcing it on users.
On the sync adds - it makes more sense for instances to have adverts as they have ongoing costs. That said, some apps might also have backend infrastructure they proxy through. They also have a right to make money off their work, if users don’t like them they can switch apps.