The idea is that you walk around a "space" that's comprised of nothing but advertisements. And your avatar is no longer "you"; you're dressed up as an avatar of the advertiser's choosing. It's an ad for Verizon? You're Michael Bay. For Marley & Me? You're the dog. You get the idea.
To get you into this space in the first place, users would be "compensated" in some way for their time. Examples given are allowing them to use a fancy avatar that can do stuff, and offering prizes for ad-related trivia questions. To truly capture the horror of this idea, we'll let the patent explain for you:
In one example, to advertise the movie TRANSFORMERS, an advertiser may provide the robot BUMBLEBEE, which is a popular character in the movie, as the advertiser-generated avatar. The BUMBLEBEE avatar may include functionality to "transform" between the robot and the CHEVROLET CAMARO depicted in the movie.