There are many ways. You'll notice that most of us here don't wait until the wax is worn off to rewax. Once the finish loses the tiniest bit of luster, it's time to wax again.
I can usually tell just by appearance. Slickness is also a tell-tale sign. Some people also look at the amount of water beading, although this can be misleading, b/c sometimes water beads from a light drizzle are not going to be there if it is pouring.
I'd say wax remains protective after it's appearance begins to wane, but I don't really leave my car go long enough to find out how long it lasts.