The most effective way to prevent shilling in my opinion is to use your watch list, research items you are interested in, determine the most you are willing to pay, your true max bid, place that max bid only once in the final seconds of the auction. Doing that your bid is not exposed for a long enough time for anyone to place a bid to run up your cost. You still compete with other proxy bidders and snipers, but you stop the most common type of shill bidder. Bidding this late in the auction is one way to prevent shill bidding. Sellers or their friends don't have the time to nibble the price up. Sniping is a written acceptable bidding tactic, according to eBay.
http://pages.ebay.in/help/basics/g-sniping.html
What it is, why and how to do it.
http://www.moyen.org/snipe/
Check this link out for some tips on how to spot possible shill:
http://www.basestealer.com/shilling.html
You might find this tool interesting:
http://auctionpix.co.uk/shill_bidding.php