Another good example of bad DMing happened to me just this past weekend a the Red Box Game Day. Our DM didn't know the stealth rules at all. In one of the encounters, there are some rogues who hide and throw daggers at people(they do more damage with combat advantage).
So, the DM made one stealth check for each of the two enemies and only one member of our group had good enough passive perception to see one of them. She started shooting arrow at the Rogue.
One of the other people in the group, seeing that we were being hit by two 15-20 point daggers each round and that our Thief was shooting at something, wandered over to see what it was. He walked adjacent to the hidden enemy in a spot where the enemy had no cover or concealment and said "Do I see anything?" The DM asked him what his passive perception was and then said "No."
At this point, it was clear to me the DM didn't know the rules and I said "How is he still hiding, he doesn't have any cover or concealment to the Fighter there. The rules say he needs that or he is no longer hidden." The DM just turned to me and stared at me with a look that said "Don't quote the rules to me", although he said nothing at all. So, I took my clue and didn't say anything more about it.
However, for the rest of the game, the second Rogue kept attacking us with daggers over and over again, completely unseen. Since, apparently, the DM didn't know that attacking causes you to stop hiding immediately.
We eventually managed to defeat every enemy on the board except the hidden Rogue. After about a round or two of continuing to do sneak attack damage every round, Our fighter decided to threaten the unseen Rogue and the DM made him run away.
I did read the adventure afterwards and I'm certainly hoping the text of that encounter didn't contribute to his decision. There's a sentence that says "If a Rogue makes a hide check vs the passive perception of everyone in the group, he is essentially invisible."