Here is a news that I'd recommend as a reference for this blog.

Much ado over click-fraud statistics - Yahoo! News

What is click-fraud?
A fradulent click generated by anyone without having a real intent of buying anything.

Who generates fradulent clicks?
People who want to drive their competitors costs higher. e.g. Company A and B are competing on yahoo/google search engines to generate higher ranking to have their ads higher on the results page. company B's ads rank top thus, it has greater number of people clicking on it and buying products.
Now, company A wants to get that position but none of the legitimate steps they have taken has worked and improved their position. In such a scenario company B takes help from certain people who uses botnets and hackers to generate fradulent clicks on the ads of company B. This would run them out of their budget soon thus, their will be pulled down from the system. Now, comapny A which ranked low will be pushed up to top position i.e. higher click through rate.

Some people who own their website and use YPN or Adsense do that too. Yahoo and Google pays to the partners for clicks on ads they served on their website. Now, to make more money out of yahoo and google some website owners make use of click frauds to drive higher traffic and click throughs.

These were very common scenarios. There could be other motivating factors and scenarios too.

Why is that an issue?
Advertisers pay to networks for an individual click. They wouldn't want to pay for clicks generated by botnets or programs as it doesn't address their objective of building brand or selling products.

There are firms that use sophisticated techniques to analyze click-fraud over the internet and report them. However, everyone do not necessarily agree with their findings. They point out that these firms are inflating figures in order to scare so that they can sell their "performance analysis" products to them. Now, here is the catch. Who is right? Large networks who want to sell their products to advertisers and publishers or analysis firms that report them.

Here is another twist. Yahoo, Google and others do not deny the fact that click-frauds are committed. As per them, they DO NOT charge advertisers for that. So, why are analysis firms making so much noise about it.
Online Advertising market is slated to grow by $3 billion this year to $ 19 billion. So, the stakes are very high for all. For advertisers, publishers, networks, SEOs, SEMs and click-fraud detectives. Everyone wants a piece of the pie.

Note: These are my person views and are not representative of my employer in any way.