Sooner or later you will spot this; a cigaratte on an offering while staying in Bali. When you ask the local why they put cigarette on the offering, you wil probably don't get straight forward explanation. Instead, you will get a blank stare as the local say," it is for good luck", "it's our tradition" or "it's been done that way since our great grand parents lived".
Ok, now what's the answer to your question?
Before we embraced Hinduism about 4000 years ago or so, we already had belief. It's called animism and dynamism. It is a believe to spirit, natural forces and anchestors. So, my history teacher taught me.
As we became Hindu, the local beliefs are still retained. What you see now in Bali is a combination of ancient Hinduism (called Tantrayana) and the local belief.
So, yea, we pay respect to good spirits, and to our anchestor until to day. We made them shrines in our family temple, in big trees around village temple, in the mountain, in the water fall and may other sacred places. Then, in short, though we are Hindu, we are still animistics. What's the problem with that?
We dedicate offerings to spirit that guard the temple door (called dwarapal), to the goodess of rice, to the penunggun karang (holy spirit who protect our homes) and more. The offerings that you see with cigarette can be dedicated to the anchestors. Maybe the particular anchestor once was a smoker, and the cigarette is only a way to show respect to the anchestor who was fond of smoking.