How can google track the conversions? They can only track the clicks. Say if visitors are clicking on clickbank or any other affiliate links, then how will google know that they are buying from that link or not?
In adwords there are tools for advertizers to track conversions. Also google can help by looking at the bounce back, they can look at the average bounce back for a page, and then if a bounce back ratio from traffic from a specific publisher is always very high, they don't even need to look at advertizers conversion rates.. That's how they know. I think, because I'm like everyone else talking on forums, I don't work at google.
It's not pixel tracking.. It's easy, inform yourself about conversion tracking tools at adwords and you'll understand better. Granted, not all advertizers use those tools, but still it is useful for adwords/adsense to spot obviously useless traffic from a publisher.. Especially if they look at a large amount of data, like one month or more worth of traffic, it's easy to spot useless traffic on ads. http://adwords.google.com/support/aw/bin/topic.py?hl=en&topic=16344 That's what I think, but everyone must be aware that google has a collective brain which is much more powerful than ours. Just like we can't start to imagine what it can be like to have a high IQ (150+) it's the same for google, we can't imagine what tools they have, even a single PHD engineer at google must have big troubles imagining it in his limited, even if powerful in our perspective, mind.