[This puzzle also commonly comes up in the guise of the interviewer and interviewees.]
A king is searching for a suitor for his daughter, so he collects the three smartest men in town. He sits them in a circle and tells them he is going to put a red mark or a white mark on each of their heads while their eyes are closed. He puts a red mark on all three and tells them to open their eyes. He then asks them if they see a red dot then they should raise their hand. They all raise their respective hands. He then says that if you know the colour dot that is on your forehead, then stand up. After a few minutes, one man stands and says the correct colour. How does he know?