AdWords has a handy feature called Exclude IP Address. Add the IP addresses that you suspect are generating click fraud to your IP address exclusion list.
You may also want to exclude ads from geographic locations that you are not specifically targeting, especially those locations that tend to generate suspicious clicks and low conversions rates.
On a side note, I noticed that the NephoScale website contains a watermark image and hidden text proclaiming “Proudly Hacked in Silicon Valley” which appears as the text snippet in search results for the company name. I’m not sure if that is a company tag line or a sign that their server has been maliciously hacked. Since it is hidden text I suspect that they have been maliciously hacked.
