Listen to what the person you are trying to read is saying. Listen intently, without focusing on your own responses. Don't trust or distrust, and don't read anything into what the person is saying; just hear him. People with unsavory motives often make slips that you later realize revealed the truth. Pay attention to the person's tone of voice.
Listen to what the person is not saying. Avoid the temptation of filling in the blanks when someone is speaking, and don't assume she is feeling or thinking something she hasn't revealed. If you detect an important omission---for example, lots of talk about the future with no mention of you---try asking a direct question about it. Objectively observe the reaction and listen to what is and isn't being said.
Read body language---facial expressions, eye contact, body movement, posture, touching---but don't jump to conclusions about what it means. For instance, a person not making eye contact when asking to borrow a thousand dollars might be lying or might just be ashamed to be asking for help. Body language can help you detect deceit---but only if you know how a person behaves when she's telling you something you know to be true.
Consider the source---friends, trappings, history and cultural differences. In some cultures, eye contact is considered a sign of honesty, while in other cultures it is disrespectful. Learn about communication protocol in other cultures to gain insight into a person's motives.
Consider all the information you've gathered when the person you're trying to read isn't around. Observe your own feelings and reactions, as they will often signal that something is out of character or doesn't seem right. Make sure you're being objective and truthful with yourself and beware of rationalizing.
Listen to your instincts.