I don't have a problem with photoshopping, especially of the type in the VS link.
I think it's a fine line and it depends what the goal of the photoshopping is. If it's to create a gorgeous photo, no holds barred. If it's to demonstrate what a product is capable of doing, I think there are some boundaries, or at least there should be a disclaimer (for example, *model is wearing FantasticLash over GlamFakeLashes). When extensive altering is done it bothers me, but a little smoothing and brightening and fixing odd angles makes sense when advertising is the goal.
I think sometimes photos markedly alter what a person looks like in real life, for example, Britney Spears generally looks fabulous on her album covers but pretty awful in the tabloids. Other times, I think photoshopping is pretty subtle, like in the VS link. Either way, I don't base my perception of myself as a comparison to anyone other than myself so I don't have an issue with magazines creating beautiful photos with photoshopping beautiful people.