While the search engine take this stuff very seriously (At least Google and Overture), They are at mercy of bots and hackers constantly assailing their systems for their own nefarious gains. By now most people out there realise they have to have virus program installed on their computer or they are bound to get burned by a vicious attack. The same thing is true of your web site. If you are a PPC advertiser, eventually your are going to get hit with fraudulent clicks, especially if you are in any of the competitive channels.
Overture and Google catch the majority of them, but your campaign is still going to get hit by at least 5 to 10 percent clicks that are not real. this number is not now, nor has it ever been, 50 percent, by the way. That's another myth that's being touted around the web right now that simple isn't true. I personally know lot of advertisers both large and small, who are getting at least 5 percent conversion rates from their PPC campaigns and that just wouldn't be possible with 50-percent click fraud rates.
This is your campaign and your livelihood. Do yourself a favour: Before you spend a whole bunch of money on PPC advertising, set up Tracking URLs. Take advantage of conversion tracking from overture and google, and buy yourself a good click-tracking solution.
Some Good, inexpensive ones include WhosClickingWho.com, Click Auditor from KeywordMax.com and ClickTracks.com. Not only will these programs inform you about nefarious clicks, but they will also tell you about the real ones so you can determine how much you should actually be paying for clicks.
With your clicking information in hand, you can go to search engines and Question any clicks that you know are bogus. The search engine companies will research on this, and if they find the clicks questionable you will get refund. Partnering with the search engines this way to safeguard your business, and no one benefits when click fraud is allowed to continue.
Another way to safe guard against click fraud is to be very careful when selecting smaller search engines to work with. many of them simply don't have the resource to invest to safeguard their advertisers from fraudulent clicks -----> you all know Them ;)