Since Google charges advertisers and pays publishers for clicks on ads, advertisers want to avoid ads which were not made with the intent of determining whether to buy the advertiser's product. But publishers want to maximize the number of clicks on ads on their pages. In addition, advertiser's competitors sometimes want to maximize the charged clicks on competitor pages as a way to drain the competitor's advertising budget. Google has instituted a number of invalid click detection mechanisms. In an suit brought by an advertiser, an outside consultant was asked to evaluate Google's invalid click detection processes. The report may be found here.Here is a description of how it works from BusinessWeek Online
David Struck … and his wife, Renee, both 35, say they dabbled in click fraud last year, making more than $5,000 in four months. Employing a common scheme, the McGregor (Minn.) couple set up dummy Web sites filled with nothing but recycled Google and Yahoo advertisements. Then they paid others small amounts to visit the sites, where it was understood they would click away on the ads, says David Struck. It was "way too easy," he adds. Gradually, he says, he and his wife began to realize they were cheating unwitting advertisers, so they stopped. "Whatever Google and Yahoo are doing [to stop fraud], it's not having much of an effect," he says.Since the publisher of the fraudulently clicked ads make money on each click they can afford to pay people to visit their sites and click on the ads.