Yep, as Bowser said, they're tragically all too common. Your vivid imagination got it right. When you click a link in a page of search listings, the site you go to receives the URL of the search page, complete with all that gobbledy-gook that includes your search terms (this is called the "referrer" page). It's easy to pick out what you searched for, and put up tenuously-related links. The links are generated by just taking your search terms and reformatting them into a search on an advertising search engine, in this case Overture.
Their objective is to pick up a few pennies each month in click-throughs by suckers. The people who do this fall into two categories: People with a few unused domain names who park them at a registrar, the registrar puts up the fake pages, and they split the ad revenue; or people who do this for a living, and in a couple of cases own more than 100,000 domains. In the latter case, they can make a pretty good living at a few pennies per month per page.
To me, nothing better illustrates the utter bankruptcy and pernicious influence of advertising, on the economy in general, but particularly on the Web. It's fraud on multiple levels--they have to fool search engines into believing that there's something there in order to get listed; they fool the people that are lured into the trap into clicking on links that generate click-thru revenue as they hunt for legitimate content; and they defraud the advertisers into paying for low-value traffic, consisting of people who are blindly stumbling around and who are less likely to buy than customers who were actually looking for something to buy.
They're trying to spin nothing into gold, creating wealth by providing less than no value by jerking people around needlessly.
Welcome to the grand circle jerk of advertising on the Internet.