In a time long before the age of man all items on battle.net didn't have a unique ID, what this meant was that any two items that were duplicated were unable to be identified from the original one and so both of them existed.
Then came along Rust Storm which closed down battle.net for around 2-3 days which then assigned every single magic, rare, crafted, set, unique and Runeword with a unique ID.
When an item is duped in the modern day both items hold the same Unique ID which cannot be seen or identified from your in-game client or through any method we know of, when these two items meet on the same server (note : not on the same *realm* but two players on the same server with two items with the same unique ID) then the person who joins last has the item disappear (i.e. "Poof").
What can you do to prevent minimize the risk of trading for a dupe? In reality there is no possible way of knowing for definite if an item is duped. To minimize the risk only trade with people who you know you can trust and try to keep trades on battle.net to a minimum.
Keep a record and history of each valuable item you own and trade for and always clarify if you know it's a dupe or not.
^^
applies to OG LOD, Blizz are on top of things in D2R it seems so risk is very low.
D2