We call it stretch, but actually we should say chainwear.
The maximum elongation of a chain should be .5%. This is almost exactly 1/16" over 1 foot.
Here's the measuring technique:
measure the lower part of the chain (the part that is in tension by the derailleur return spring). Taking a ruler (a metal yardstick works best), measure from the edge of one pin, to one 12" away (or 11", if your only using a 12" ruler). If the same edge of that pin is more than 1/16" past the even-inch mark, replace the chain. If you are showing more than 1/8" stretch, replace the cogs, too. If you are showing 1/4" stretch (honest, I did see this once), count your blessings, and throw the whole lot away.