How to spot shill bidding...

First of all, you may be wondering how and when you should suspect you're being shilled. For most victims, it is a sneaking suspicion that creeps up on them over the course of the auction, but it doesn't hurt to be proactive and a little paranoid. :)

The following are some warning signs to look for:

The Devoted Bidder.
A bidder bids exclusively or nearly exclusively on one or two sellers' items--yet rarely wins. It is true that many people lowball their bids on one seller's auctions hoping to win a bargain. Usually, however, the items are similar products--perhaps this seller's specialty--and the bidder hopes to get a bargain on shipping as well by buying all from the same person(s).
However, the "devoted bidder" is especially indicative of shilling when the items are varied. It is highly unlikely, for example, that a bidder just happens to need a quilt, a man's suit, a woman's dress, a backpack, 2 laptops, a lamp, and a slot machine, among other items, just at the same time as one seller happens to have all of those items up for auction!

How do you find out if the ID you suspect is a "devoted bidder"? Do a Bidder Search on the User ID, using the eBay Search link located on the top navigation bar of almost every eBay page. Sellers' names are now listed on the Bidder List page, so you can quickly and easily see if the bidder prefers one (or two) seller(s).

Bidding to Lose.
Question: When you want something that has an opening or current bid of, say, $10.00, and you're willing to pay around $20.00 for it, would you put in a proxy bid of $19.99? Of course not. That would be stupid, you answer. You'd go with the even $20, or, if you're really smart, maybe $21.00 or $23.00, or even $20.37, just to throw other bidders for a loop and increase your chances of winning. Maybe you'll even bid $15 now and watch the auction to see if you need to bid $20 later. But $19.99?! Who wants to risk losing by a penny? So what is the putz that bid $19.99 doing? This is a "loser bid". It is specifically designed to lose, not to win. It's guesswork shilling, hoping to push another bidder (that's you) up to the next increment, or--if they're really brazen--your max.
Be careful! The amount of the "loser bid" depends on a) the opening bid and b) the current high bid (determined by other bidders). It's NOT unreasonable to bid $19.99 when the opening or current high bid is $9.99. Also, you may get confused about which bidder is a potential shill. Make sure to check the time and date of bids. You can find this information in the Bid History, after the auction is over, from the link on the main listing page.

Similarity of seller & bidder IDs.
This is something you'll only come across by chance, and you sometimes need to take the category into account. Watch for alliteration and initials, as well. For (fictitious) example, "jsmith" might have a shill ID "joesmith". This is the type of similarity you should report as a potential shill. Sometimes the similarity is based on common interest, however. Another fictitious example: Seller "sanrio-rules!" has a bid from user ID "ilovesanrio!". Seller "sanrio-rules!" sells (you guessed it) Sanrio products. Check the other warning signs if you want, but the ID similarity is probably purely innocent and based on a common interest. If you see that "ilovesanrio!" is also buying a toaster from "sanrio-rules!", however, you should probably report it to SafeHarbor.

Seller is too quick to relist.
When items are accidentally won by a shill account, they are often relisted soon after auction closes. This is particularly salient for non-duplicable items: handmade, unique, or rare/hard-to-find items, especially antiques, art, and collectibles. Though it does happen that a high bidder refuses an auction immediately after winning, it is more likely that they'll string the seller along for at least a few days. Relisting in fewer than 4 days is far too soon to not activate your radar.
How do you know the item has been relisted? Far be it from a shiller to eat the listing fees on an unsold item. That just wouldn't be fair. The shiller will likely relist using the eBay relist function in order to get their listing fees back. Therefore, the original listing page will have a link to the new auction. Of course, their intelligence may for once override their greed, and they might start up a whole new ad, which can be found in the current seller history.

Shotgun feedback.
Feedback is exchanged during a curiously short period of time (3 days at the outside). Feedback between shill and seller ID is known as "shill feedback"--a little consolation prize for the seller who accidentally wins their own auction. Few find it easy to resist. These days, with instant payments more and more common, it is really only the bidder-to-seller feedback that counts here. Which is just as well, because
it's the seller (the primary account) who's usually the lucky feedback recipient.
It is possible for a bidder to receive an item and leave feedback within 3 days (it happened to me once by the good graces of the Royal Mail Fairy). Possible, but not common. Look for other indicators, such as fast relisting, and use your own judgment. It won't hurt anything to report it--the seller will get to explain to SafeHarbor.

Numerous Retractions.
More than 3 in a 6 month period and you have the right to be suspicious. Let's face it: anyone truly that stupid or careless should not be using eBay. I mean, considering that after the first time you bid $1000 instead of $10 you needed to change your shorts...would you really let it happen again? The bid retraction option has been the favourite tool of shillers since the beginning. The shill bids outrageously high in order to reveal your maximum, then retracts and either:
gives some lame retraction explanation like "oops, wrong amount" and bids again just under your max,
or
gives some lame retraction explanation like "don't want it", signs in under another account, and bids just under your max.
Since the number of bid retractions now shows up in your feedback profile, it is significantly less popular. We see more and more shillers using the guesswork technique, chipping away slowly at other bidders' proxy maximums. However, the newbie criminals still use it. Report 'em and nip 'em in the bud while they're young.

Nibbling.
Nibbling is when you see someone who has placed a series of bids one after another, upping their bid a little each time.
If this has resulted in the bidder winning the auction then it is a often not a problem and is just an indication of a bidder who does not understand how the proxy bidding process works, or had no fixed maximum price.
When the nibbler has retracted their highest bid leaving another bidder as the winner then you are looking at suspicious activity.
How to report shill bidding:

Use the report link on the Shill Bidding Policy page, found here:
  Shill Bidding Policy 

You can still use eBay's direct e-mail, which is safeharbor at ebay.com.  When forming your reports, it's important to include as much evidence as you can. This includes all user IDs, auction numbers, and miscellaneous evidence to help your report.

Keep the details because if safeharbor don't see enough evidence the first time around, you can use your initial report plus any new evidence should the behaviour continue.
How to avoid shill bidding:

Check out your seller's feedback thoroughly before you bid! Are there a disproportionate amount of "not a registered users" in their feedback profile? Is there a disproportionate amount of "0" and "1" feedback users in their feedback profile, with suspicious dates? For instance, make sure feedback is being exchanged only a few hours after the auctions close.

Check out the bidding history of your seller. Are they placing bids exclusively on another seller's items? If they are shilling for another user ID, the chances are someone is shilling for them as well!

Check the bid histories of ALL the bidders on the auction. Simply view the "bid history" of the auction in question, and plug those names into the bidder search engine. Are any of the bidders bidding exclusively on your seller's auctions? This is perhaps the most important step to avoid shill bidding--always check the bid histories of any auction before you bid!

Snipe your bids! The closer to the end of the auction that you place your bid, the less likely you are to be SHILLED. For instance, placing your bid 10 seconds before the auction closes would practically ensure you wouldn't be shilled AFTER placing your bid, as there isn't enough time. This doesn't guarantee that the auction hasn't already been shilled up to that point, but it does prevent it from being shilled further AFTER you bid.

AuctionPix Shill Bidder Tool

To use the AuctionPix - Shill Bidder Tool you enter an eBay item number and the tool looks at other items offered by the same seller on which the same bidders also appear. The item numbers of items found are then displayed, allowing you to conduct further checks.

Hope this helps all, keep your eyes open...

Till Then...............