I happens often, sadly. I have lost several auctions to snipers. It is not against eBay rules, and apparently not illegal or immoral since the reasoning is that you posted the most you would be willing to pay, so any bid at any moment which surpasses that is legitimate.
Anyway. Snipers can be a pain in the ass. I have canceled winning bids which were first placed in the final minute of my auctions before. In my opinion, if it is worth bidding on, it is worth being bid on early.
Having said that, there is a free service which will snipe items for you, and it even has a neat Firefox plugin.
http://myibay.com
