But here's some critical information to limit the damage, in case this happens to you or someone you know:
We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them easily.
File a police report immediately in the jurisdiction where it was stolen, this proves to credit providers you were diligent, and is a first step toward an investigation (if there ever is one).
But here's what's most important: Call the three national credit reporting organizations immediately to place a fraud alert on your name and Social Security number. I had never heard of doing this until advised by a bank that called to tell me an application for credit was made over the Internet in my name. The alert means any company that checks your credit knows your information was stolen and they have to contact you by phone to authorize new credit.
By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend (someone turned it in).
It seems to have stopped them in their tracks.
2012 Add-on: I just learned about Freezing Your Credit, which sounds like the best possible way to protect against Identify Theft - assuming you don't need frequent credit checks. Since we're retired and seldom apply for credit anymore, I froze mine. Go to http://en.wikipedia.org/wiki/Credit_freeze to read all about it. As it turns out, the Equifax and Experian cost $10 to freeze and $10 every time you want to unfreeze. TransUnion is free. Innovis wouldn't work and I've never heard of them anyway. The Wikipedia article explains all about it and make it simple to do.
Also, related, I read a thing about the dangers of using the same password for several accounts. It seems that some of the more nefarious webmasters are setting up free websites where you can get something of value (information, discounts, coupons, or whatever), but you have to create an account with username and password. They then capture your password and try it on some of your bank accounts, etc. Many of us use the same password for many accounts, just to make it easier to remember - as of now, I'm changing that practice.
2013 Add-on: FYI - Decided to change to DirectTV last month and learned that I'd have to unfreeze credit. I unfroze all three with a phone call to each and nobody charged me. When you unfreeze, you can specify how long and it will automatically refreeze.
2016 Add-on: Well, I've noted a couple of problems with this credit freezing. Firstly, I was in Best Buy and they offered me a discount if I'd apply for a credit card, so I did. It was refused -- due to my credit freeze. It wasn't worth the trouble to unfreeze it, so I just skipped the discount. Then, later, I realized that my wife had gotten a couple of new credit cards, which meant that her credit isn't frozen. Just freezing mine and not hers kind of defeats the purpose, since we're still unprotected. I didn't even attempt to convince her I should freeze hers, so I decided to just unfreeze and take my chances. We're retired and living on Social Security now anyway, so I'm not sure our identity is worth stealing ... LOL