The article is claiming that it looks like the site that is using Paypal (as opposed to Paypal itself) is the one that is calling Paypal "The safer, easier way to pay." To build on your analogy, if there was an independent site that provided links to news stories, and the Fox logo was designed to look as follows:
"Upcoming Political Race Heating Up"
Read about it on:
___ __ __
| / \ \ / / \ |\ | |\ |
+--- | | X | | \ | | \ |
| \__/ / \ | | \ | | \ |
fair & balanced \__/ | \| | \|
which one is the average visitor more likely to click? In this case, Fox has designed its logo to look as though the independent site is saying that Fox is "fair and balanced." If someone else appears to be endorsing Fox, it's much more likely to sway opinion. That's the whole point of the article.BTW - I love your ASCII art logo design.
People don't have to be stupid to be manipulated in the way the author suspected; it just takes being busy, having a specific goal that one wants to realize (buy software) and focusing on it, and not being particularly interested in the internal implementation details of the mechanism of manipulation.
As marketeers become more sophisticated, and choose to employ more devious methods of swaying opinion - the ability of the general population to successfully decode these messages improves.
Take a look at some advertising messages from the 50s, or some propaganda posters from the first or second world war - their messages wouldn't hit home today (unless they're served together with a liberal dose of irony).
Audiences become more sophisticated over time.
The answers to the above questions are, respectively: "A lot," "A huge number" and "Less than 8%, according to a Google survey."
You could replace a good 80% of the instances of "stupid" with "busy" in design discussions, and you'd end up with better discussions.
When I worked at McDonalds (1st year of university) the cheese slices for the burgers were delivered in a box marked 'Processed Cheddar Cheese Food Product'. I built the rule then and there: If you have to say it's food, it probably isn't.
I now apply that in the business world. Got a slogan that says 'We're the best' or 'Fair and Balanced'? Processed Cheddar Cheese Food.
There is a fine line. Sometimes you need to make a statement of this nature. A sniff test (bs detector) usually helps in borderline cases. If you even have to ask whether the rule applies, it probably does.