TV and advertising have always existed side by side. But now that viewers can easily skip breaks, brands are having to find new ways to make sure customers get their message. Can you resist 'native advertising' and 'digital insertion'?

We've all had that feeling. One minute you're absorbed by another gripping instalment of quality TV drama; the next, you're wondering why there's been a box of Cheerios hogging the shot for five minutes, or why all the characters are driving the same brand of car, or why that otherwise credible teenager is using Bing as their search engine. Your blissfully suspended disbelief comes crashing back down to marketing-strategised reality. There should be a word for this – something like "adjected" or "brand-fallen".

Netflix's House of Cards is one of the worst recent offenders. The Emmy-winning political drama is littered with cameos from BlackBerry, Dell, Samsung, Coca-Cola, Chevrolet, and numerous other brands. In one scene Kevin Spacey's Machiavellian antihero Frank Underwood sits down in a friend's living room, picks up Sony's latest gaming device and remarks, "Is that a PS Vita? … I ought to get one of these for the car." In another, Underwood and his aide are monitoring police communications from his office – and laid out on their desk are no fewer than nine iPhones and iPads.

The show's brand bombardment was widely noted – "More like House of Product Placement?" asked the Los Angeles Times – but it would be unfair to single it out. In recent decades, "native advertising" – that is, advertising within programmes as opposed to commercial breaks – has crept across the entertainment landscape like a fungus. In 2012, advertisers spent $8.25bn on product placement, and the market is expected to nearly double in the next five years.

In the US, programmes are often indistinguishable from the ad breaks between them. Primetime soaps and sitcoms including Days Of Our Lives, Modern Family and Chuck regularly shoehorn infomercial-like scenes into the drama, and reality shows are even worse (American Idol clocked up an impressive 577 placements in 2011). Even supposedly sophisticated shows such as 30 Rock, Breaking Bad and The Office indulge in it, often with a knowing wink to viewers at the distastefulness of it all. No wonder Game of Thrones is so popular; it's practically the only show where you can be sure no one will launch into a monologue on the merits of a foot-long Subway sandwich.

One factor fuelling the rise of product placement is that traditional advertising breaks aren't hitting home like they used to. We love our new era of quality television so much, we'll do anything we can to watch it uninterrupted, whether that means paying subscriptions, watching on DVD, streaming and downloading online (legitimately or illegally), or, most often, using PVRs to fast-forward over the ad-breaks. According to research, 90% of households with digital recording use it to skip ads.

"There's a growing realisation that we're being trained to be blind to advertising," says Mark Popkiewicz, CEO of British-based advertising company Mirriad. "That is undoubtedly going to drive a very hard equation between the people who are putting the advertising dollars on the table and the people who are distributing the content and trying to make the economics work. Certainly something has to change."

Mirriad claims to have the answer. Its tagline is "advertising for the skip generation", and it is one of a handful of companies ushering in the next phase of native advertising: "digital insertion". It's a term we're likely to hear more of. What it essentially entails is inserting virtual, CGI products and logos into content after it has been filmed. That could be anything from inserting a billboard into the background of a shot to putting virtual objects such as cereal packets or drinks cans on to dining tables. It has already happened on British TV. In Channel 4's Deal Or No Deal in 2012, PG Tips logos were mapped on to contestants' previously blank mugs.

Digital insertion makes standard product placement look like a blunt instrument. For one thing, it doesn't interfere with the creative process – it all happens in the editing suite. For another, with big-budget TV programmes often selling to 200 territories worldwide, deals can be tailored locally. With Sony's Hannibal TV series, for example, the Bentley featured in some scenes was altered to become a Mitsubishi in Brazil, to coincide with the car company's launch campaign there.

Computer-generated PG Tips on Deal or No Deal.

It's a booming market. Mirriad recently signed a major deal with Vevo, the music video site (did you notice that vintage Levi's billboard inserted into Aloe Blacc's The Man?), and will announce another "very large deal" in the US imminently, Popkiewicz says. The possibilities are limitless, and potentially ominous. The company also recently inserted billboards advertising Vodafone into reruns of Dallas in the Middle East. In theory, all of TV and movie history is now ripe for retroactive commercial exploitation. Might we suddenly find Inspector Morse driving a Hyundai? Boxes of Cheerios cropping up on Citizen Kane's dining table? A Subway outlet in Game of Thrones? Unlikely, says Popkiewicz. For one, advertisers are seeking popular new programming targeted at younger, more persuadable viewers, "but also brands aren't daft. The last thing they want is to be in the wrong place at the wrong time."

Many observers have scratched their heads as to how Netflix is financing home-produced fare like House Of Cards, estimated to have a budget of at least $80m. But the makers of the show say product placement was not involved; Apple, Sony and co did not pay them a penny. "It's interesting that some people thought they noted product-placement stuff, that even crept into the dialogue, which was not the case at all," said episode director James Foley, discussing Kevin Spacey's PS Vita moment. "So it's a weird thing to me: if we use real products like people do in real life, somehow that's perceived as being forced-in product placement when it's just recording reality."

Coronation Street Nationwide ATM.

Does that mean we've been seeing product placement where there wasn't any? Not quite. There's a difference between paid-for product placement and unpaid prop placement. The latter is a necessary part of TV and movie production, and most brands very happily provide free products for the purpose of set dressing, everything from gadgets, clothes, food, cars, you name it. Companies such as Budweiser will even happily turn up and build you a free bar interior if you need one. It will be plastered with Budweiser signage, of course. Similarly, Apple has been been known to equip office sets with banks of new computers for free. During the 2012 Apple vs Samsung trial, Apple's marketing chief Phil Schiller admitted that the company didn't really need to do much advertising as it got enough publicity already from news reports and prop placement. "We would love to see our products used by stars in movies, TV shows, and we have a person who helps provide products to people that want to do that," he said.

It has worked handsomely. According to Brandchannel, Apple products appeared in 43% of US box office No 1 films in 2011. A 2010 episode of Modern Family revolved around the acquisition of a new iPad – and aired the day before the iPad launched. It was a similar story with House of Cards. In response to a blog for Engadget titled "Is that Kevin Spacey behind all those Apple products?", crew members from the show told tech journalist Sharif Sakr that Apple had sent thousands of dollars' worth of free merchandise on request, to be used as they wished. They then blitzed the series with Apple products "as a thank you".

British TV is changing, too. Ofcom relaxed the rules barring product placement in 2011, albeit with stricter guidelines than in the US. Occasionally it has been unobtrusive – such as Nationwide's sponsorship of the cash machine in Dev's corner shop in Coronation Street – but elsewhere it's been jarring – such as ITV's deal with Samsung for The X-Factor, which led to scenes of contestants squealing with delight to receive goody bags of Samsung gadgets, and turned every phone call and video diary entry into a mini-plug for the brand. We've also been increasingly happy to accept programming that functions as wall-to-wall brand promotion, such as hit drama Mr Selfridge, or reality shows documenting the fortunes of major airlines (Airline, A Very British Airline) and retailers (Iceland Foods: Life In the Freezer Cabinet, Liberty of London).

House of Cards … littered with Apple products. Photograph: c.Everett Collection/REX

As viewers, we have to accept that virtually all TV content – save for exceptions such as the BBC – is paid for by advertising. Interrupting programmes every 15 minutes with a commercial break was never a perfect system, but it at least drew a clear line between advertising and content. Now the boundaries have blurred. This is a defining decade for negotiating the balance between personal freedom and really cool free stuff. Just as we happily click "accept" for terms and conditions we never read in return for free services from the likes of Google, so we have signed a new compact with TV advertisers without quite knowing what it is.

But viewers have their terms and conditions too. The principal reason product placement hasn't swamped British screens since 2011 is that we literally find it a turn-off. "If viewers think something is false or weird, that's when they reject it," says Gary Knight, commercial content director at ITV. "So editorial teams, which have got the ultimate power, are not going to allow that to happen. The production teams in many ways become guardians for the viewers. I think that's a good thing. Don't forget, we're ad-funded. If we don't get as many viewers, we're not going to get as much ad revenue and we wont be able to pay for the shows in the first place."

Happily, House of Cards' second season wasn't nearly as rife with disbelief-inducing moments as the first. There was a scene where two journalists interrupted their conversation to chug bottles of Stella Artois for a few seconds, but on the whole, the brand spots didn't seem to jar with the fans as much. Maybe that means we can have our cake and eat it after all. Or perhaps we just didn't notice it as much this time round.