Shill bidding is when the seller under a different name (or someone working with the seller), pushes the bid up to get more money for an auction. Shill bidders can also raise the price high enough so the seller is satisfied, or shill bidders can "win" the auction so the seller doesn't have to let the item go to someone for a bargain price. In effect, shill bidding can create a hidden reserve. It's usually easy to see when this happens IF you know where to look.
When the auction is over, look at the bid history. A shill bidder usually places a number of small bids to push the price up. Remember, the shill bidder often doesn't want to win, so they usually won't place one or two competitive bids. Instead, you'll see something like five small bids all placed 2 minutes apart. If someone really wanted to win an auction, would they bid that way?
Also, shill bidders usually have zero or a few feedback points, because they never really win or sell anything. And yes, if you see a seller you suspect is using a shill bidder, check out their other auctions. Chances are you'll see 3 or 4 different zero feedback bidders that frequently bid on their items. These are all shill accounts.
This problem is epidemic. Go to eBay and check out the bid history on 15 - 20 completed auctions... I'll bet there are a few that fit this shill biding pattern.
I always check the bid history when I win an item, and if I think there was shill bidding I refuse the buy the item. If the seller was shill bidding, they won't have the nerve to report you for not paying.
Nothing in the history of man has brought out con-men, cheats and crooks like eBay. If there is a way to rip someone off, you can bet someone on eBay is trying it. It's much easier to rip people off when you don't have to look them in the eye and you can change identities with a few mouse clicks.