Mitch Wagner has a post on click fraud. He talks about the fraud perpetrated by "competitors". I am sure that is one source of the fraud, but there is an issue he seems to miss. There are usually at least two other players that stand to gain from that kind of fraud - the operators of the system who make money on every click and the "partners" of the operator who display ads on their websites.
To be blunt the main operator of this kind of ad network is Google. In addition to standard content sites that display ads, they have a number of search partners that display search results and ads.
Because the advertisers depend on Google(or other operators) to police the network and the process is not exactly transparent(and Google or other operators are not an unbiased party in this cycle) it is hard to tell if a good job is being done.
I have mentioned before that I think this kind of fraud threatens their business model.
