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Think about it this way. If you were an advertiser would you pay Google money for clicks on your adds if you knew someone could click it 1000 times to make themselves money? Google adds bring in BILLIONS of dollars a year and they are almost forced to continuosly research click fraud.
I dont think I would want to know how they could tell. It might scare me.
On a side note: My brother called me the other day and said 'Brad, you make money off of these adds on your site right?' I told him yes and he said 'Cool I clicked each one a couple of times for you'. I almost killed him.
Google doesn't reveal how it determines fraud.