Instructions
Use a diamond tester to identify whether a stone is real. Available online from jewelry accessories stores for as little as $60, diamond testers are roughly the size of a highlighter pen and very simple to operate - it's simply a question of touching the tester to the diamond and reading off the result of the test from an LED display.
Ask the vendor whether the diamond has any accompanying documentation. Most modern - that is, recently mined and mounted - diamonds come with a grading report from organizations such as the Gemological Institute of America. The absence of such a report should give you cause for concern.
Look at the settings of older stones. Because diamonds are so precious, the jewelry into which they are mounted will always be of very high quality, as evident in the materials used -- high-carat gold and platinum for the most part - and in the exactness of their construction. If a piece seems crudely made, then the stone mounted in it is most likely not a diamond. With gold jewelry, anything less than 18 karat purity should should be cause for suspicion.