[Joe Wicked]

Perry,
There is no 1 solution to prevent it, but there are a lot of things you can do. Here is what I do:
1: I shred all mail, including junk mail. Anything that has my name and address on it. I have seen people dumpster diving for mail, and at that point I began shredding.
2: Watch ATMs for a device that is over the card slot. I inspect all ATMs carefully before I use them. some of these card readers are very tricky to see. They look like they are part of the machine.
3: I never write checks at the store, and I avoid using a credit card where they have to use paper to run it if I can.
4: I do not mail any bills out by putting in my mailbox and letting the mail carrier pick it up. I will take it to the post office and drop it in the secure box. Most credit card companies want you to write your account number on the check, so on that 1 piece of paper is your name, address, checking account number, routing number, credit card company name, credit card number, and signature. At that point the only thing missing is your SSN number.
5: Never give out personal information over the phone or internet unless you are on a secure site. Check the Verisign, or other security info first.
Most (but not all) ID thieves go for the easiest mark they can get. If they have to work to get anything, they move on, the guy down the street is easier picking. Some like the challenge however, and if they pick you, there is not much they wont try.

I have been looking into using one of the services like LifeLock as well. So far my precautions have worked, I know of 2 instances were someone has tried, one was a failed attempt at getting a car, it was turned down because I have 2 car loans already. The other I am still fighting. Someone in the L.A. area used my name for a telephone and didn't pay the bill. I never lived at the address, and the SSN is not mine, so I don't know how they have it on my credit report, but I am fighting it. Luckily it is not that much, so it isn't hurting me as bad as it could. Both instances are from before I started taking precautions.