It is annoying, but it's not illogical.
If you have looked at something once, say there's a 99% chance that you have no further interest in it. But the 1% chance that you are potentially going to buy it after being shown the ad again is still much better odds than showing it to a random person, or a random person who is somehow correlated to the target market.
Even after seeing the ad 50 more times and ignoring it, you are probably still a statistically better lead than someone who has never interacted with the ad. They're not making a strong assumption about you, even though it seems that way. They're making a very weak assumption based on the small number of people who clicked once, hesitated, saw the ad 49 times more, carried on hesitating, and now are finally ready to buy.
I do wonder if advertisers can turn that behavior off and/or limit the number of times their product is shown to the same person.
I also wonder if Meta has some kind of model that's predicting post-impression interest.
Step two, I get retargeted. That’s fine and expected.
Step three, I get retargeted. Again. And again…and again.
What I don’t understand is how Meta/Instagram can’t figure out at least a little bit sooner that I was clearly just satisfying my curiosity and now every time I see the same ad I scroll by extra fast or otherwise interact in ways that should indicate disinterest.