First off, there are two kinds of leg length difference (LLD): anatomical and functional. All citations following are from Physiopedia. If you are interested in the matter, I suggest you just read the whole article.
Anatomical LLD
Definition and measurement
Structural limb length inequality. It’s a physical (osseous) shortening of one lower limb between the trochanter femoral major and the ankle mortise.
Thus, it can simply be measured using very characteristic bone structures. Either by radiographics or by using a simple tape measure: you can palpate the trochanter major, the lateral joint space of the knee joints, and obviously the lateral ankle. Thus, one palpates them, takes the measures from trochanter major to knee joint space and from there to the lateral ankle, and adds them. Plus point here is that it makes no difference whether people are physically able to extend hip and knee joints to a neutral position.
Development
Congenital conditions include mild developmental abnormalities found at birth or childhood, whereas acquired conditions include trauma, fractures, orthopedic degenerative diseases, and surgical disorders such as joint replacement:
- Idiopathic developmental abnormalities
- Fracture
- Trauma to the epiphyseal endplate prior to skeletal maturity
- Degenerative disorders
- Legg-Calvé-Perthes Disease
- Cancer or neoplastic changes
- Infections
From my experience, the most common reasons for pathological LLD are the trauma (esp. fracture into) to the epiphyseal endplate (which can stop or alter bone growth), and badly done joint replacements.
Prevalence
A systemic review evaluating the prevalence of LLD by radiographic measurements revealed that 90% of the normal population had some type of variance in bony leg length, with 20% exhibiting a difference of >9 mm.
This shows that obviously, it is not a bad thing as such. Problems occur mostly beyond 1.5 cm from what we learned in our physio education.
Functional LLD
Definition and measurement
Non-structural shortening. It is a unilateral asymmetry of the lower extremity without any shortening of the osseous components of the lower limb. FLLD may be caused by an alteration of lower limb mechanics, such as joint contracture, static or dynamic mechanical axis malalignment, muscle weakness, or shortening. It is impossible to detect these faulty mechanics using a non-functional evaluation, such as radiography.
Thus, you basically need to see these persons walk and be able to make out and interpret certain signs. There is no "measuring" those in the classic sense.