Conversion Rate - How does Google determine?

Lots of talk about conversion rates affecting EPC, smart pricing

[inactivist]

I see a lot of people mentioning Google's AdSense PPC payouts being affected by 'conversion rate' - how does Google know what my site's conversion rate is?

Is it based solely on data collected from Analytics (Urchin)? or are there other ways for G to know how well a click from an ad on my site 'converts' into an advertiser's goal? (Never mind how one defines the goal...)

[DamonHD]

For those AdWords buyers who use it, there is a facility to record various sorts of conversion, eg by recording arrival at a 'thank you for your purchase' page, optionally with a conversion value to automatically compute ROI.

I have conversions into 'sticky' users rather than sales since I don't use AW to sell anything, but I still have AW note the 'conversion' for me to make it easy for me (and G) to note which sources work for in terms of total cost per conversion. (And note, it isn't always the lowest CPC that I care about.)

Some AW advertisers feel reluctant to supply this data to G in case it is used against them, but G is probably able to extrapolate reasonably well from those AW users that do supply it, enabling SmartPiercing(TM), etc, to do its thang...

Rgds

Damon