Read an interesting article on click fraud of search engine sponsored links. The article is in the July issue of "Computer", the IEEE computer society magazine. Unfortunately they don't offer a free on-line version. The article was pretty basic but some interesting figures:

30% of search engine visitors click on 1 or more sponsored links
6% of search engine visitors result in invalid click
5% of the invalid clicks are identifiable fraudulent clicks
1% of the invalid clicks are unidentifiable fraudulent clicks

The article estimates the unidentifiable fraudulent clicks could be costing search engines $10 million +. Though I think this would be coming out of the PPC merchants

Andy