Fraud alerts can be placed on your credit report, so when a retailer or creditor checks your report in response to a request for a new credit card or financing for that plasma television, the fraud alert tells them to double-check that the person seeking credit is you. Ideally, the creditor delays extending credit until reaching you.
Alerts focus only on criminals opening new credit lines in your name, not the use of existing accounts. Also, some retailers don't check credit reports before extending credit and those that do don't always try to reach you -- they may just ask the criminal some easy-to-answer questions. Still, alerts increase the chance you'll be contacted if someone applies for credit in your name.
You can call or go online to each of the three credit-reporting agencies to place a fraud alert for free. Generally, fraud alerts expire after 90 days.