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They have a lot of security measures from checking IPs, cookies, etc. From browser types, country of origin, etc, they have enough data from their toolbar to determine how many clicks SHOULD be made off a site, and from what type of person. With analytics and conversion tracking software on many advertisers' sites, they also know if the clicks from your site are converting.
But still, there are lots of ways to game it, and Google turns a blind eye to a lot of it.
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