I would think it should matter what you stole. For example, if you took an apple, of which there are thousands, why wouldn't you be able to sell it? If you stole an expensive, but standard, set of armor, your ability to fence it should be limited in the vicinity, save perhaps to professional fences. On the other hand, stealing an incredibly rare item should make it almost impossible to sell, unless it's part of a quest.

I would also like to see attempting to sell stolen loot to its original owner an event that gets the guards called - with the aforementioned rules in place. That is, only significant items produce this response.

Yah, no, omniscient guards.

I'm hoping they have something similar to what Fallout 3 used. Though instead of Karma, having stealing something effect your infamy instead.

But if no one saw you steal, why would you infamy increase? Karma, be it good or bad, is something that does not require anyone to see you.

Excuse me if I am wrong, but I thought that stolen items wouldn't even show up in the list when you were selling stuff to regular merchants.

Not to get philosophical, but isn't morality subjective?

You might think that it is right to kill a character, but when you do, you get negative karma?

Especially if its something as trivial as picking a lock (or hacking a computer) which doesn't hurt anyone if you're not stealing.

You should sell stolen items to any merchant, besides to the one that u stole the item from duh >.<. and if u try he could notice and report u to the guards. I think thats the way it worked in morrowind.

OK, let's summarize the formula:

• The stolen items in your inventory are marked as stolen, but as an option, you can toggle the indicator off, if you like.
  
• There can be a formula that would define if an NPC recognizes a stolen item from you, if you are wearing it and you pass him by, or if you are selling the item to him, or if he is inspecting your inventory to find stolen items, as a guard.
  
• Each stolen item has an internal data, which marks the position that it was first stolen, and has a price, and has a defined owner, and that owner has a faction.
  
• Each NPC has a recognition threshold that defines his perception on stolen items, and guards and traveling merchants have higher perception than other people, and any NPC would instantly recognize the items that belonged to him, so you cannot steal a robe from a person and wear it right away.
  
• Unique items that are recognizable throughout the nation are instantly recognized.
  
• Otherwise the formula is based on the price of the item for the NPC, the distance of the NPC from the original place of the item, the NPC's perception, whether the NPC is in the same faction as the original owner, and whether they are inspecting your items or just see you passing by while wearing the item.
  
• The time that the item was stolen also affect the formula, so as the time passes, they become harder to recognize as stolen, except for the unique items.
  
• Edit: The relation of your type of clothing with the stolen item can also affect the perception of the inspecting NPC, as well. (Added)
  
• Fences do buy stolen items, but they bargain hard, buy cheap, and sell dear, but they can change the item so that it cannot be recognized as stolen, after that.
  
• The items that would be recognized as stolen, would be automatically removed from the list, when you want to sell them to a regular merchant, but the ones that are not removed, are optionally marked as stolen so that you know what you are doing.

So you can steal items from a house and sell the junk to the nearby merchant, and go further away and sell the more priced items, and go further away and sell the more priced items there and so on...

For the more important items that you have stolen, you have to find fences, and those people bargain hard, so you cannot become rich overnight, or you can carry them to another town and sell them there to a regular merchant, for better price than what a fence would pay.

You cannot wear a stolen item near the place that it was stolen, for a long time.

That's a sound solution IMHO.

Edit: Worthless junk, food and alchemy ingredients should not have any stolen mark to begin with. You would not recognize a carrot from the other.

I would also like to support what Sphagne said. I really like the concept of NPCs recognizing worn items. I could just see myself walking along wearing a stolen cuirass, when suddenly in a shrill, wood elf voice I hear, "Hey! That's mine! Stop! Thief! Guards!"

I would also like to see some NPCs have a tolerance towards thievery. Especially if it's a first offense and your reputation is otherwise spotless.

You don't think the shop keep is looking, and you deftly pocket the amulet.

The shopkeep looks at your disapprovingly. "Put it back, Nord, if you know what's good for you."

Oops, busted. You place the amulet back on the table and exit the building. You don't expect him to be as forgiving next time.

Is there any way something can be implemented to allow you to get away with theft, even when caught?

In-game example of how I'd like it to go:

You steal a sword from a man's home as he sleeps. It's just a normal sword, nothing special about it.

The next day, you're walking the street, brandishing the blade, as your victim walks past. He sees you with his sword. To anyone it's just another sword, but this man knows better, he's had that sword for 15 years, he knows every nick and groove on it. He knows it's his.

He chases after you, shouting and screaming for you to give back his sword, then he screams at the guards to apprehend you, the thief. The guards circle you, but with no intent to harm you, and ask if they can ask you about the sword. You can:
A: Refuse, and they'll forcibly detain and arrest you (or try to), and charge you for not co-operating, and maybe the theft too, since running or refusing to answer quests would lead them to suspect you of guilt.

B: Accept, and try to convince the guard that the blade is yours. Factors like personality, reputation, factions and the value/rareness of the stolen object will lead to the guard either arresting you for theft or letting you go about your business, and if this were Sphagne's system, removing the flag from the object, or at least lowering the the chances of you being caught for thievery, as others might still believe the accuser, even if the guards didn't.

Having a system like that, in my opinion, would increase the value of Personality and Speechcraft, which need as much attention as they can get, and add some more flavour to the game.

Why should you be arrested for theft when the only person who saw the crime is the person who would benefit from accusing you of theft? Crimes committed with witnesses around (excluding witnesses you've... silenced) would of course be much more difficult to cover up. But if your Speechcraft and Personality are high enough, there's no reason why you shouldn't at least be able to talk your way out of it.

Edit: Can't type for poop.

That's actually a really good idea you've got there, Sphagne! I doubt what we end up with will be as sophisticated as your idea, but I do hope it's a damn site better than Oblivion's laughable excuse for a crime system.

Just to add to the merchant/guard example you quoted at the end, I think that both the thief and the character who the sword was stolen from should have to make a speachcraft check to determine who the guard believes. Making it easier to steal from a commoner, or low level merchant, than it would be to steal from a noble or renowned blacksmith.