You don't need a special device, as a simple ruler will do. Sheldon Brown, as usual, has a simple, clear explanation: http://www.sheldonbrown.com/chains.html. If you scroll down near the bottom, you'll find a section entitled "Measuring Chain Wear."

Once, at a LBS's maintenance clinic, the shop's co-managers insisted that you should, as a matter of routine, replace the chain and cassette! every 500 miles! I don't go there any more. My present chain has somewhere around 5000 miles without any tell-tale chain-skip, and the chain also passes the measure test.