This question was raised today by a ProTechCoach follower on G+. There are of course lots of viewpoints on this. For instance if you don't have the extra $moolah$ in your Kindle budget to consider the without ads version, then the question is pretty moot and at the end of the day, with ads for a new Kindle is still a good deal in my opinion.
Now, if you have the extra money, then read on for my experience and recommendation on this burning holiday gift-buying question <grin>!
I bought a "with ads" version of a previous Kindle and figured, "why spend the $20 to not see ads on the lock screen?". You only see ads when your Kindle is not in use since e-ink screens don't turn off they have to show something, so putting ads here does make a lot of sense. Unfortunately, there have been several occasions when the ads being displayed were not of a sort I wanted to see or would want anyone else to see on my Kindle and draw the wrong conclusions about me. After all, not everyone understands ad displays on Kindle and may well think the cover they see is of what I'm currently reading. For instance I really don't want anyone to have the impression I'm a fan of Obama's (ex. ad for some hideous book about / by him), a reader of harlequin romance type nonsense (ex. you can imagine the covers I'm talking about) and a few others that really just made me mad (generally political or fluffy headed nonsense like "Eat, Pray, Love"). Why mad? Because Amazon, from whom I've now bought several hundred books, should have a better idea about my interests than to show me ads about which I not only don't care, but despise.
Summary: spend the money and get ad-free. I will next time.