Not many people understand the real issue with click fraud - that is, it's very lucrative if you can use networks of anonymous zombie-PCs and automated software. It's also impossible to detect. This Wired news article by Adam Penenberg is one of the few that goes beyond the basics.
"There are guys out there that have made a career by gaming the search engines out of their advertisers' money," Holcomb said. While competitor click fraud has received the most attention, affiliate fraud is a much bigger threat to the search ad market -- and both are getting harder to spot, since "hitbot" software, designed to mimic human behavior, is getting more sophisticated all the time.
There is a HUGE incentive for sophisticated click fraudsters to slowly but surely build fraudulent traffic via compromised PCs. Google and publishers currently have no way of distinguishing those clicks as fraudulent.
Besides, I've come to think that the market has discounted click fraud for now, and until something spectacular happens, it's not gonna get addressed.