The People who run Gulf & Western Industries Inc., a multibillion-dollar conglomerate, were so happy with their 1978 annual report that they wanted to show it off in a big way.

So they decided to reprint it in full in this coming week's issue of Time magazine.

All 64 pages of the report -- including the financial footnotes -- will be carried as a special insert in Time's 4.25 million-circulation domestic and 365,000-circulation European editions -- a promotional splash that will cost G&W $3.3 million (and that's after discounts).

It is the most expensive ad run by anyone at any time anywhere, according to Time officials. The previous record was held by the Pennsylvania Bicentennial Commission, which paid $1.28 million for a 48-page insert in Readers Digest.

Intended as the kickoff to G&W's 20th anniversary, the ad is being heralded by company officials as a bold innovation in advertising. Time Publisher John Meyers has called it "a milestone in business communications." Meanwhile, Madison Avenue, not quite sure what to make of the idea, waits curiously to see what the public's response will be.

"Like any ad, it's designed to get a message across and create an interest," said Martin Davis, G&W's executive vice president.

The intended message is that G&W has grown into a very large, very diverse, and, for the most part, profitable financial empire.

"Gulf & Western began," the annual report recounts, "as a small Grand Rapids company called Michigan Plating and Stamping, which made the rear bumper for the Studebaker, employed approximately 500 people and had 1958 sales of $8.4 million and a net loss of $730.

"In just 20 years, G & W has evolved into a broadly diversified corporation, now 59th on the Fortune 500 list, with more than 100,000 employes, sales of $4.3 billion and earnings of $180.5 million."

Today, G&W oversees more than 100 separate companies lumped into eight semi-autonomous operating groups. It owns Madison Square Garden, grows sugar cane in the Dominican Republic, produces movies through Paramount Pictures, publishes books under Simon and Schuster, makes cigars, weaves clothing, manufactures pulp, rolls steel and lends money -- just to name a few of its businesses.

Time officials estimate that, given the pass-along factor in a circulation of news weeklies, the G&W ad will be exposed to 22 million people.