The question is mentioned in the title. I just came around a site listing supposingly using arbitrage, and me not knowing what it was, I googled it. So I read and read, and basically it is to target cheaper keywords, bring traffic to your site from Adwords, and have high EPC keywords on your site with a high CTR. Is this illegal? According to the sources it wasn't, but others say it is... I'm confused!
It is now, but very very very hard to practice, you cannot make money from it. because adsense program can easy detect traffic from adwords, then... it can easy eat your money
I know google is banning adsense members who are using this strategy! It's just a matter of how you will do it, just play safe and nice for you not to be caught.
It is not illegal from "law" perspective but against "rules" made by Google. If you are not playing the game by rule then you would be kicked out sooner or later. That's all.