Google AdSense "click fraud"

Google executive calls click fraud the biggest threat to the Internet economy, urges quick action.
"I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model," Google Chief Financial Officer George Reyes said.

I always wondered if the pay-per-click model of revenue is for real. Its pretty funny to see that a giant Internet company like Google relies on just "ads" for revenue, though the beauty of Google's ad revenue is that it creates ads specific to key word search.
I also doubt it if advertisers really increase their sales by using Google's AdWords program given the rampant click fraud.