It's not how dumb do they think we are - they know we aren't that dumb - at least not MOST of us. It's like any other scam (legal or not) - it's a numbers game. If you get 1000 people to look at that add and only 10% respond and only 1% of that actually fall for it you are still making money. Think of it like the legal rebate system. The company's who offer a mail in rebate KNOW (stats back it up) that only a certain % of the people who make the purchase will send in the rebate - saving them money. So instead of just marking their product down $50 they force a mail in rebate system that they know statistically will make their overall discount only $30 (pulled all numbers out of my ear - I do not know the actual percentages.)
I read an article in readers digest a while back talking about a guy who not only sent the money to Nigeria (common scam is called Nigerian bank scam) but he flew there and personally handed them MORE money. Humans can be a very gullible species. Many of us just can't pass up the possibility of loosing out on such a GREAT deal and look past the possibility of it being to good to be true.