Scurramunga - 2:38 am on May 13, 2010 (gmt 0)
That's whatever the advertiser determines is a conversion. It can be a sale, a signup, a lead, even a pageview.
AdWords gives you special code to put on your confirmation page, so that when a conversion occurs, that code will track it.
With regards to conversions, If I'm not mistaken that determination is similar to that of the former pay per action referrals program (where the publisher also opted in and placed referrals code on the page). Except from what I gather on this thread it's now the advertiser who opts in, so I am guessing that clicks would still be paid for.
It would rely on the honesty of the advertiser to a large extent, I assume?