AdSense uses a payment mechanism for each publisher. Every time someone clicks on those ads. So click fraud is an attempt to have people click on ads just so they can get more revenue.
Some people prepare the site for the sole purpose of deceiving generate revenue through Google AdSense program. These users achieve an incredible amount of clicks through many methods, some using a sophisticated manner and using simple means.
Google has a very strict policy regarding click fraud, and can sue them using techniques such as in the past. But while search engine giant tries its best to minimize the risk of click fraud there must be room for much improvement.