1. I don't feel this is a "one or the other" question, as I believe both will happen. Amateur user-generated content I feel will continue to improve as professional software (such as Final Cut, iMovie, Photoshop, Flash, etc.) become more available and user friendly to the average computer user. I feel people between the age of 15-30 are much more adept at using this technology than the generation before. At the same time, I believe professional production values will continue to drop but not go past a certain point. A lot of "homegrown" ads are used because they have more of a potential to go viral online (passed and sent from person to person)
2. The social media site I use the most is Facebook, and the only other one I use on a semi-regular basis is Twitter (I do not "tweet", I follow news sources/athletes/musicians). I use Facebook to mostly stay in touch with others in a more "public" setting than text messaging. I've reestablished contact with some of my old friends who have moved away. I don't play any games (I played Farmville for a bit but stopped) and rarely do any quizzes.
I think Facebook is more successful than MySpace because it is a more streamlined and user-friendly interface. MySpace allowed their users to customize almost all aspects of their profile, such as backgrounds, text, music, etc. Many people were not "graphic experts", resulting in pages that were very hard to look at. Additionally, Facebook encourages people to use their real names (or a first and middle name) as opposed to MySpace's abstract nicknames. This may make it appeal to a larger audience among adults (post-college).
While Facebook has drawn criticism in the past for it's ever-changing privacy settings and various other changes (new photo viewer, website redesigns, etc.), it is still one of the most visited websites on the internet and does not show any sign of slowing down for the time being.
3. Transparency is important because what you write online is readable by everyone indefinitely. If your tweets or website or other social media expression is sponsored by a third party, the legitimacy of what you write is questionable. The integrity of the writer may also be compromised. This controversy happened a few years ago when a Gamespot.com review editor left the site after giving a game, whose publisher sponsored the site at the time, an unfavorable score. LINK
I think transparency is just as important in the offline world. Take magazines or newspapers for example. While it has been noted that all press is biased, cable news networks such as FOX News and MSNBC have been criticized in the past for promoting conservative and liberal political agendas, respectively. Keith Olbermann recently left MSNBC after it was discovered he donated money to democratic political campaigns. News sources should be as unbiased as possible and if not should be noted who they support, so the public is aware facts may be twisted.
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