1.  Find out about the item.

So you want a new cell phone?  A new watch?  or maybe a new car (yes, ebay has those too!)?

Ask your friends!  Go to a store and look the item over.  Make sure to take a good look at the item. 
A few sellers do sell knockoffs here.  Caveat Emptor!  (In case you do not know what that means, it means "Buyer Beware!").   There are quite a few guides on ebay to help you figure out if an item is fake.  If you do get a fake, DO NOT immediately post a negative comment about the seller.  If you do you lose any leverage you may have.  Rather you should first contact the seller, and sometimes the seller is willing to exchange it or refund your money.  Now, back to our topic. 
Once you have an idea of what model you want to get, try to read some reviews on that item.  Remember, a search engine (ie Google, Yahoo, etc...) is your friend.
The review may tell you there is a better product out there, in which case you may want to go back to your friends and ask them more about the item.

2.  Know the price of the item.  Can't stress this enough.  I've been fortunate enough that everytime I overbid for an item.  Someone outbid me! 

So how do you find the lowest price of an item?  Well, firstly you can go to your local store and see if they have the product and how much it is.  Then additionally,
I would go online to some of the price comparison sites ie. pricegrabber or shopper (just add .com to those) (ebay forbids posting of external links which is why I didn't make clickable links here).  I would even go to Amazon!  Though their prices are not so hot nowadays.  Then also look at completed auctions here on ebay to see what price most people are getting it for. 

3.  Figure how much of that lowest price you want to pay and place your bid.
 
Remember that unless the item is from a store, and there are legit stores on ebay, that most of what you are getting comes WITHOUT a warranty.  For example if I want to get a power supply for my computer.  I can find people who will part with their new power supply for a fraction of the cost.  But if that someone is a private party and/or they cut off the UPC symbol.  You maybe out of luck getting warranty service on it.  But I digress (means I'm getting off the main topic)

Many people have different ways of doing this.  Some like to use ebay's bidding system to enter their highest bid.  Others like to watch the item and bid last minute (often called sniping).  This is very similar to actual auctions at auction houses.

My personal strategy?  It depends on my interest in the item.  But generally, I don't agree with some of the other guides that say bid early and bid high.  I almost never do that.  I usually bid early (not too early) and bid low, like 60% off the lowest price found above.  So if I get it I get it a bargain price.  But then I still stay with it at the end if I have lots of interest in it.   Even if I'm still winning the bid.  Because someone may come in last moment and steal the deal. 

Aside (in this case means I'm going off on a tangent here):  I use firefox as my browser, and it has this real handy addon called ReloadEvery that refreshes every so often, fully configurable, from every second, (must have an ultra high speed connection, or the page will seemingly never come up)  to  999 minutes and 59 seconds (that's a little under 17 hrs, for the math challenged.  16 hrs 39mins and 59 seconds to be exact).

So I keep two windows opened when it's near the end (say 10 to  15 minutes till end of auction).  In one window I keep the auction refreshed using reload every at say 30 seconds and in the other window on the bid screen ready to bid on my final price.