Shill
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A shill is an associate of a person selling a good or service, who pretends no association and assumes the air of an enthusiastic customer. The intention of the shill is, using crowd psychology, to encourage other potential customers, unaware of the set-up, to purchase said good or service.
Usually, shills are employed by confidence artists. Their use is often illegal, though this varies as the precise definition of what comprises "shilling" is debatable.
The word "shill" is probably related to "shillaber", a word of obscure early 20th century origin with the same meaning.
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Shills in gambling
The illegal and legal gambling industries often use shills to make winning at the games offered appear more likely than it actually is. For example, illegal three card monte peddlers are notorious employers of shills. These shills also often aid in cheating; they will disrupt the game if the mark is likely to win.
In a legal casino, however, a shill is merely a gambler who plays using the casino's money in order to keep games (e.g. especially poker) going when there are not enough players (this is different from a prop player who is paid a salary by the casino for the same purpose, but bets with their own money.)
Shills in marketing
In marketing, shills are often employed to assume the air of satisfied customers and give testimonials as to the merits of a given product. This type of shilling is legal and almost impossible to detect.
Sometimes, shills also assume the air of hapless overworked employees, whining in their blogs that they are working their asses off to get the long promised vaporware out of the door, and that we should please, please, please stop bugging them about it.
Shills in retail
In retail, shills assume the air of enthusiastic customers. This is done particularly when goods of usually negotiable prices—like automobile—are to be sold; otherwise, it is not very profitable. This type of shilling is probably legal, but rarely used because of the damage it threatens to a retailer's reputation.
Shills in auctions
Shills, or "potted plants", are frequently employed in auctions. Driving prices up with phony bids, they seek to provoke a bidding war among other participants. Often they are told by the seller precisely how high to bid, as the seller actually pays the price (to himself, of course) if the item does not sell, losing only the auction fees.
Shilling is an even larger problem in online auctions, where any user with multiple accounts (and IP addresses) can shill without aid of participants. Many online auction sites employ sophisticated (and usually secret) methods to detect collusion, and a number of people have been sent to jail for online auction fraud in the past decade.
A common shilling tactic is to have two shills. The first is a young child who offers a low bid for a moderately-priced item. Other auction participants will be reluctant to outbid him. The second shill is an ill-mannered and usually overweight man who does just that—he outbids the kid, who starts crying. In theory, this should provoke other auction participants to outbid the man solely for the sake of beating him; by bidding well beyond the item's value, he can artificially increase prices.
This practice is illegal in most, if not all, jurisdictions.