It's (mostly) a US thing; basically subsidizing TV prices with ad revenue. It's how the entry-level companies like Vizio operate, though the "big brand" TV makers are certainly just as guilty here. It's much less of a thing in the EU, where data privacy laws are stricter and TVs are hence (comparatively) more expensive.

As far as I know, they don't literally scan your media libraries; they screenshot whatever you're watching through HDMI (most often cable / satellite boxes), as those devices don't provide the telemetry that normal apps do. This info is used for audience measurement (thing Nielsen ratings), as well as showing you ads that are actually likely to match your interests.

No this is isn't just a US thing anymore. Every TV has automatic content recognition now, of some kind or other. Even in the EU.