USING THE PARK TOOL CHAIN WEAR INDICATOR TOOL
There are various tools available from manufacturers to measure chain wear. One of the most popular among them is the Parktool CC-3 model. It is very easy to use. It is a “go-no go” gauge designed to accurately indicate when a chain reaches .5% and .75%, the points at which most chain manufacturers suggest replacement. Here is a video showing how to use it.
When the chain is relatively new and very little wear the .75 end will not go down inside the link as shown in image A. When the .75 end goes down inside the link as shown in image B it is time to replace the chain. When the 1.0 end goes all the way down as shown in image C it is badly worn and time to replace the chain and sprockets as the chain has probably worn the sprockets.
And HERE is an article on this.
Parktool has the CC 3.2 model out now which is longer and therefore a bit more accurate.