Olympic host Beijing has set up a sex determination lab to test female Olympic athletes suspected to be males, state media reported Sunday. Experts at the lab, located at the Peking Union Medical College Hospital, will evaluate dubious cases based on their external appearance and take blood samples testing sex hormones, genes and chromosomes, Xinhua news agency said.

Sex testing has been routine at the Olympics and other sports events for decades, triggered by fears that male athletes sought to cheat by posing as women. Indian athlete Santhi Soundarajan was stripped of an Asian Games silver medal in 2006 after failing a gender verification test.

I'm trying to imagine walking through a hospital and seeing a big "Olympic Sex Determination Lab" sign over a door. The Futurama episode Bend Her comes to mind.

Per Wikipedia:

Sex determination tests typically involve evaluation by gynecologists, endocrinologists, psychologists, and internal medicine specialist.

Controversies:
The practice has come under fire from those that feel that the testing is humiliating, socially insensitive, and not entirely accurate or effective anyway. The testing is especially difficult and problematic in the case of people who could be considered intersexual. The genetic tests provide potentially inaccurate results and discriminate against women with disorders of sexual development. Genetic anomalies can allow a person to have a male genetic make-up but be physiologically female.

Current status:
Sex testing has been done as recently as the Atlanta Olympic games in 1996, but is no longer practiced, having been officially stopped by the International Olympic Committee in 1999. This followed a resolution passed at the 1996 International Olympic Committee (IOC) World Conference on Women and Health "to discontinue the current process of gender verification during the Olympic Games."

The International Association of Athletics Federations too stopped conducting the tests in 1991. However the Olympic Council of Asia continues the practice.

New rules permit transsexual athletes to compete in the Olympics after having completed sex reassignment surgery, being legally recognized as a member of the target sex, and having undergone two years of hormonal therapy.

China 'sets up Olympic sex determination lab'