As for your card, I believe this happens when dodgy establishments or individuals use a different type of card reader that scans and stores the data in the magnetic stripe of the card. They can then use this to create a duplicate card that is exactly the same as the original. It was in all probability done while making a legitimate payment somewhere. See this.

I believe card companies provide some protection against damages in this kind of fraud – the merchant can be made to ‘chargeback’ the amount. Though… I’m not certain about this… you’d best check. Wikipedia states (regarding credit cards) “U.S. Federal Law can hold the cardholder victim responsible for up to $50. Merchants in high-risk industries, like unattended automated fuel pumps or Internet sales, anticipate a certain amount of credit card fraud, and set prices accordingly. These higher costs are then passed onto the customer.” So I guess beyond $50 you’re entitled to a chargeback… though, I’m not sure if chargebacks apply to debit cards or only to credit cards though.

Wikipedia’s entry on debit cards has this to say:
“In many places, laws protect the consumer from fraud a lot less than with a credit card. While the holder of a credit card is legally responsible for only a minimal amount of a fraudulent transaction made with a credit card, which is often waived by the bank, the consumer may be held liable for hundreds of dollars in fraudulent debit transactions. The consumer also has a much shorter time (usually just two days) to report such fraud to the bank in order to be eligible for such a waiver with a debit card[15], whereas with a credit card, this time may be up to 60 days. A thief who obtains or clones a debit card along with its PIN may be able to clean out the consumer’s bank account, and the consumer will have no recourse.”

Which is why, in general, it’s safer to use credit cards (also, the money doesn’t come directly out of your bank account with credit cards, another plus).