Here's another take on this. The basic tools are the same what are in the comments of the answer above but also we will exploit
$$\prod_{n=0}^\infty(1+x_m)=\sum_{S\in\mathcal{P}_f(\mathbb{W})} \prod_{m\in S}{x_m}$$
Which seems true but I don't know the name of this supposed identity. I have asked about using this identity here.
Applying this to $\prod_{n=0}^\infty{1+z^{2^n}}$ we find
$$\prod_{n=0}^\infty{1+z^{2^n}}=\sum_{S\in\mathcal{P}_f(\mathbb{W})}{\prod_{n\in S}{z^{2^n}}}=\sum_{S\in\mathcal{P}_f(\mathbb{W})} z^{\sum_{s\in S} 2^{s_i}}=\sum_{n=0}^\infty {z^n}$$
The first equality is the identity we exploit. The second is just unpacking some of what a product is: we are using $z^az^b=z^{a+b}$. The last equality is the one of interest: It really holds because $g: \mathcal{P}_f(\mathbb{W})\to \mathbb{W}$ defined as $$g(\{s_1, \dots, s_k \})= \sum_{i}^k {2^{s_i}}$$ is in fact a bijection. Note that $g(\{\})=0$ and $g(\{0\})=1$. Indeed we are just formally saying "Every natural number can be written uniquely as the sum of
distinct (non-negative) powers of $2$.
To finish the argument of the OP we will just say that the geometric sum identity is well known. And thereby we have established that
$$\prod_{n=0}^\infty{1+z^{2^n}}=\sum_{n=0}^\infty {z^n}=\frac{1}{1-z}$$
And we somehow have avoided induction but this might be tucked into the argument which establishes the product sum identity above. I am not sure.
$$\sum_{n\in I}z^{n}$$
where $I$ ranges over all the natural numbers (plus zero) which can be written as the sum of distinct powers of $2$!.
– Alex Youcis Mar 25 '13 at 23:21