If I want to know if skype is installed, I would type this:

viggy@ubuntu:~$ apt-cache policy skype
skype:i386:
  Installed: 4.0.0.8-1
  Candidate: 4.0.0.8-1
  Version table:
 *** 4.0.0.8-1 0
        100 /var/lib/dpkg/status

Or if Eclipse is installed:

viggy@ubuntu:~$ apt-cache policy eclipse
eclipse:
  Installed: (none)
  Candidate: 3.7.2-1
  Version table:
     3.7.2-1 0

But let's say I want to know if the Java Virtual Machine is installed. How would I know what to pass to apt-cache policy? For example, you might not know what to pass to apt-cache policy for some programs:

viggy@ubuntu:~$ apt-cache policy java
N: Unable to locate package java
viggy@ubuntu:~$ apt-cache policy JVM
N: Unable to locate package JVM