A postage stamp that is in used condition, is one that has been canceled as a result of having paid postage fees on a letter or parcel, that has gone through the mail system. They are usually canceled by pen stroke, a "killer" type cancel, or by a circular date stamp.
This also applies to special stamps that have been used to pay taxes on various legal documents. These types of stamps are called Revenue stamps, and they are similarly canceled, either by pen stroke or a circular date stamp, the same as postage stamps are canceled.
The various types of stamps in used condition are as follows:
"Killer Cancellations" - were used extensively from the 1870's through the 20th Century. In the 1870's and until the early 1900's, it was against the postal rules for a stamp to be canceled with a circular town stamp, so a type of cancel known as the "duplex" cancel was devised. On the left was the circular town cancel, and on the right was a large obliterating mark. The obliterating mark was intended to completely obliterate the face of the stamp, so it could not be re-used. Normally, these types of canceled stamps are unacceptable to many collectors, however, on the other hand, some of the postal clerks at the New York Foreign Mail office in the 1870's devised very fancy obliterators (above) with geometric designs, which are highly prized by fancy cancel collectors of early U.S. stamps today.
"Modern Killer Cancellations" - from the mid-20th Century through today, cancels utilizing killer bars (above), usually horizontal wavy lines, have been used to obliterate postage stamps. These are generally considered undesirable by collectors.
"Corner" or "non-Obtrusive Cancellations" - these are cancellations that strike only the corner or a reasonable portion of the stamp (above), leaving most of the stamp design visible. These types of cancels are the ones preferred by most collectors of used condition stamps.
"Bulls-eye Cancellations" - these are town and date cancellations that are applied so they fall right in the middle of a stamp (above). Nice ones are highly sought after and PRIZED by POSTMARK collectors!
"Pre-Cancels" - these are stamps, primarily sold to businesses, that are canceled prior to their sale. There are collectors that specialize in collecting these, and some of the scarce ones are very high priced.
"Canceled to Order" or "CTO"
- Originally, these were stamps canceled by the post offices of certain
countries and sold to collectors for below face value. These were
scoffed at by collectors for a long time, but they have been accepted
more by the collecting community as time has passed.
There is another "CTO" type of cancellation, but they are really NOT CTO's. From the early 20th Century to the present day, many Western European countries have provided canceled stamps (above), usually with a first day issue cancel, to collectors. They are NOT sold at a discount from face value, and they are very popular with European collectors. Most of the used condition stamps of Germany, Switzerland, and Austria, especially the semi-postals on the market today, are mint, full gum, never hinged stamps, with crisp cancels and sharp detail. These are actually the "used" stamps that all the major catalogs price today, and they are usually the same price as the mint stamps listed in the catalog. Postally used examples of these stamps, soaked off cover, are actually worth LESS than the canceled stamps sold by the post offices to collectors.
"Manuscript" or "Pen Canceled" stamps. On the earliest US stamps, many post office officials used a fountain pen to cancel stamps. These cancels, on classic stamps, are a little less desired by collectors, but they are legitimate. Many smaller post offices in the 1800's did not have rubber stamp cancelers, so a fountain pen was their only way to cancel stamps that were applied to letters.
On the other hand, modern
stamps, with ball-point pen lines drawn through them, are usually the
result of a postal worker being too lazy to go get a standard canceler,
before they begin processing new mail. These are completely worthless.