A new study has come out that suggests that the problem with click fraud is much bigger than what Google and Yahoo! are admitting to. This article is an interesting read all the way through, but AdWords advertisers will want to pay especially close attention to the end of the piece:
Click fraud doesn't appear to be a major problem when the ads appear on Google's and Yahoo's respective websites, Milana said. The trouble starts cropping up once Google and Yahoo deliver the ads to other websites that are part of their vast marketing networks. "They just don't know what happens beyond their own firewalls," Milana said of Google and Yahoo.
What does this mean to you? Disable content network distribution of your ads! Surely, there are advertisers who are getting great returns from their ads being displayed on the AdWords content network, but it's not for the feint of heart.
A good practice is to run some tests with content network distribution, monitor the metrics of those tests, then judge your ROI form there. This is not recommended for new AdWords users–get your accounts tuned for performance first, then experiment with more advanced techniques such as this.