Identity theft is a crime -- specifically, it's a fraud. The criminal uses another person's personal information to either create a fake identity or use the victim's identity in fraudulent ways. Most of the time, the goal of the thief is financial. He may use the victim's Social Security number to apply for a credit card, then spend freely and never have to worry about the bills, because they're linked to the victim.
The first thing you need to do to protect your credit is to be vigilant about it. Look over all bank and credit card statements carefully, and look into any suspicious charges. Track down even small charges you don't remember making, because sometimes a thief will make small purchases at first to see if the account is still active. Be wary if a bill doesn't show up when it ought to - someone might be stealing your mail to read your account numbers.
It's also very important to check your credit score at all three of the major credit rating companies (Equifax, Experian and TransUnion) on a regular basis. Some experts suggest checking them every three months. The Federal Trade Commission requires each of those companies to provide you with one free credit report every 12 months.
Use a credit card when you go shopping online. A debit card offers no protection if your account number is stolen and used. Credit card companies limit your liability on fraudulent purchases, and you can dispute false charges. Also, make sure any Web site you use for purchases is secure -- most Web browsers have an icon that lets you know whether or not a site uses encryption to keep your information safe. Never make purchases or check online accounts on a public computer or public wireless network. Also stick to shopping on reputable sites.