A click fraud threshold of 1 would basically mean that every click done by any one person (be it genuine or fraudulent) would have that person's IP blocked immediately and added to the exclusion lists of all of your campaigns.
This is not a recommended setting because of two reasons:
First off, you will be blocking genuine traffic for sure after their first click.
Secondly, the cap placed on the exclusion lists by Google has to be taken into consideration:
The maximum amount of IP's that can be blocked at any one time is 500. Once that cap is reached, our system will start removing old IP's and putting in new ones instead and this will cause the fraudulent IPs to be released faster that if the threshold would have been set to 2 or 3 clicks.