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 or Mac OSX.  Though this should be applicable to any operating system.  IE linux users should try to reformat it ext2 or ext3 or reiserFs or whatever filesystem you use. 

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.

For you Mac people.  This should also work, though untested on a fake stick (I threw mine away rather than returning it for the cost of shipping so that the seller couldn't resell it).

Go to Disk Utility
for the OSX users it should be in Applications>Utilities>Disk Utility on your primary disk.
for earlier versions of MacOS you're on your own in finding it.  Though the following procedure should be about the same.

Go to the left hand side and choose the usb stick.  Don't choose the indented one or it won't work (it won't screw up your system either)
Click the partition tab on top where it says "First Aid" "Erase" ....
Just below the top line there should appear another button that says "Current Partition"
Click and hold it down. 
Choose 1 partition and  release your mouse click.
The box below the button should now say "Untitled 1".
To the right of the box there should be another button to the right of the word "Format".  Make sure that says MacOS Extended (Journaled).  If not click it and choose
    it from the pull down menu.
Click the Apply button on the lower right.

If it gives an error or hangs forever (give it about 5 to 10 minutes) then chances are it's a 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.

BTW If you get a fake, which I did, rather than immediately giving the vendor negative feedback, after which you will probably lose all leverage,  email the vendor and see what he has to say.  I did and he immediately shipped out a good one, without making me send the other back.  Though he said if I were to send the other one back he would refund my shipping costs too.  I did not ship him back the other one, lest he sell it to the next unsuspecting person.