No that should not happen, my guess is a person had your display / destination url as they were promoting a direct link to your product. It then seems on purpose or by accidental not knowing have swapped out the destination url for another similar type product but not changed the display url which is wrong.

you could send G a email regarding the ad who would be able to sort the error, in most cases its just people who do not understand the rules and change out the destination, thinking they are doing the right thing.

Wow, I remember that this used to be allowed a few years ago but things might have changed since then. What they are doing is Google let's you choose what link to show underneath your ad(display link). What this company did is use your website as their display link but when you click on it, it takes you to their site. It's a real dirty trick and it's happens in every industry but as far as I know, it's ok to do this. I'll check it out and reply again if I find different. Hope this helps.

Update: I was wrong, it has changed. Here is the link from Google:

http://adwords.blogspot.com/2008/02/...rl-policy.html

As Try suggested, email google and give them a heads up.

Thanks guys, I shall email them today really appreciated.