I've bought about five usb sticks so far through ebay.  Most were fine however I did get one bad one.  This is how I determined it was bad.  This uses Win NT or higher.

First method:
     Format it, make sure you can do either FAT32 or NTFS.
     If you can't maybe your system hasn't been configured correctly. 
     a.     Go to My Computer>(Pick your USB Drive). 
     b.     Right Click > Properties
     c.     Go to the hardware Tab on top
     d.    Choose your USB device and click on Properties.
     e.    Go to Policies on top.
     f.     Choose optimize for performance and click ok.
     Now try the format again.
     Format it NTFS.  If you get an error then there's a good chance it is a fake.


Second Method:
      This is just a twist on the first method.  We will try to convert the drive to NTFS.
            Bring a command prompt up.  (Start>Run>cmd)
                  enter the following and press return.  I'll use z as my usb drive.
                  convert z: /fs:ntfs
             If you get an error. theres a good chance that it's fake.


Another simpler way (This is for a kingston):
     Just plug the USB drive in and if the LED is not in the head you have a fake. 
     Also on the USB plug itself there should be some writing on it whatever model it is / how big it is.
         Followed by a model number and a Voltage at the end of the first line and CHINA at the end of the   
         second line.

The packaging looks the same.