I wonder how chrome will handle it. Type in "Pepsi" and you get taken to search results that make google money. What if it becomes a valid URI?

It may work like with a custom host file, but with better UX. If you add something like domain.dev to your hosts file and just write it onto your search bar without http:// Chrome will do a search and while searching check if there's a DNS entry for that 'weird' domain, if there is it will show you a tooltip asking if you wanted to go to http://domain.dev.

You're probably right. But given the choice, isn't it better to go with something that's easier to remember, even if it won't matter most of the time?

pepsi.com or www.pepsi or site.pepsi or brand.pepsi. You've then just got a multitude of hostname parts to guess - which is more confusing.

Not really. If you don't know what you're looking for, you just go to http://pepsi/ and navigate from there.

I don't fancy hostname clashes.