Consider the geometric series generated by 1/(1-x).If I were to factor the series out I would get $$\frac{1}{1-x}= (1+x)(1+x^2)(1+x^4)(1+x^8)...(1+x^{2^n}) ...$$Suppose I were to take the natural logarithm of both sides I would get the following: $$-\ln(1-x)= \ln(1+x)+\ln(1+x^2)+\ln(1+x^4)+...\ln(1+x^{2^n})+...$$ Let $x=-1$; I would get $$-\ln(2)=\ln(0)+\ln(2)+\ln(2)...$$
But this should be wrong because the ln(0) is infinity. What's going on?
Note that the identity you wrote is incorrect. It is the case that $$ (1+x)(1+x^2)(1+x^4)\dotsb(1+x^{2^n}) =\frac{1-x^2}{1-x}\times\frac{1-x^4}{1-x^2}\times\dotsb\times\frac{1-x^{2^{n+1}}}{1-x^{2^n}}=\frac{1-x^{2^{n+1}}}{1-x}\tag{1} $$ so $$ \sum_{i=1}^n\log(1+x^{2^i})=\log(1-x^{2^{n+1}})-\log(1-x);\quad (-1<x<1) $$ where the restriction is necessary so that the log laws hold.