http://en.wikipedia.org/wiki/Click_fraud
As pointed out in the article, it is very difficult to prove click fraud, and moreover, there is a conflict of interest for Google and other search engines, who are the ones doing the detecting. However, I have a friend who works for the click fraud detection group at Google, and they certainly take it very seriously. It is to Google’s advantage to be diligent about defending against click fraud, as this makes their adwords program more attractive to advertisers.
Usually, the worst thing that could happen to you is having Google invalidate your clicks or ban your IP. But, there are potential moral issues as well, in my humble opinion.