It's a common misconception that everyone who has a black belt is an unstoppable force of martial nature. The fact of the matter is that this is rarely the case. First off, most martial artists quit when they reach 1st-degree black belt. Many of them don't even continue to practice the fundamentals to keep their skills sharp. Second, many martial arts schools are "McDojos." In other words, if you pay the instructor money, you get a belt, regardless of how good you are (or how much you suck). Third, when a legitimate instructor awards a belt, they look at more than just fighting prowess. They also consider the student's teaching ability, how much they care about others, their work ethic, and dedication to the art. While the best instructors consider all five factors, most will be biased towards one area. A master who promotes based on technique will be biased towards fighting prowess; a master who promotes based on understanding and application of martial theory will be biased towards teaching ability, and so forth. So at the end of the day, all that someone's belt tells you is how long that they have been training under a particular instructor. It tells you nothing about how good their technique is, the quality of the instruction which they have received, or if they could actually survive a common street attack.
So how do you know if Mr. Tough Guy (or Mrs. Tough Girl) is really as big and bad as they say they are? The best way is to spar with them at either their dojo or yours. If they kick your butt, they are obviously legit. If they don't beat you, but come at you with everything they have and the kitchen sink, that's a good sign as well. If they cower under your gaze (or simply wimp out of sparring with you completely), then their belt is not worth the cloth that it is made out of.
That being said, it is not always practical to challenge everyone you meet. Here are some other ways to find out if they can smoke the bad guys with their skills or are simply blowing smoke up your rear.
-Find out who they got their belt from. They should be able to trace their lineage back to either the founder of the art or, at the very least, to the culture where it came from. Obviously, if they got their belt from one of Bruce Lee's top protégé's or a member of the Gracie family, then they are probably legit. If it is from Angry Bob's Fighting Shack, you should be skeptical.
-Find out how long it took them to get their belt. While it is possible to earn a black belt in two years, it normally takes three to four to get it from a reputable master. If you are training in Brazilian jiu-jitsu, it usually takes 8-10 years. For each additional degree (a.k.a. "dan") ranking that they claim to have, it should have taken them at least an additional one or two years, if not longer.
-Look at how old they are. While the key milestones in the martial arts vary from system to system, the typical ones are instructor (first dan), expert instructor (fourth dan), master (fifth dan), and grandmaster (ninth or tenth dan). In academic terms, they would be the high school diploma, bachelor's degree, master's degree, and PhD., respectively. Someone claiming to be a first-degree black belt should at LEAST be in their mid-to-late teens. Someone claiming to be a fourth-degree black belt should be in their early-to-mid twenties. A YOUNG fifth-degree black belt will be in their thirties. Realistically, you are unlikely to encounter a legitimate ninth or tenth-degree black belt. If you do, they will probably be in their late sixties (or older).
I once met a seventeen-year-old who claimed to be a seventh-degree black belt. Since I trained for a year at the school that he went to, I found this highly dubious. You should be equally suspicious of anyone who makes such grandiose claims.
-Do a background check on the person by speaking with their master and fellow students. Most masters won't criticize a student to an outsider (unless that student did something truly disgraceful). However, a master will usually praise an exceptional pupil. If the master acknowledges that they trained that person and says nothing else, then that student is probably average or sub-par. If the master has never heard of that person before, than you've been lied to. The person's training partners will usually be more forthright about how good (or lousy) that student is. However, you want to talk to at least three or four of them to account for personal biases. After all, the training partner who gushes about them might be their best friend. The one who trashes them might be doing it out of jealousy or because of a grudge.
The key thing is to remember that someone's belt only tells you how long that they have been training under a particular master. What's far more important than the color of the belt is the person who's wearing it, which is why you must find out as much as you can about that person before you allow them to impress you.