Good counter to Possession in Dominon: Alchemy
A good discussion with lots of tips to that exact same question is here: http://forum.dominionstrategy.com/index.php?topic=10001.0.

In general, more often than not you can just ignore Possession. It's really expensive, and on many boards, you can just get enough points without it that your opponent who is going for it will be too far behind. Remember that if you have $6 and a potion, then if that Potion had been a silver instead, you'd have $8 for a Province. 

Attack cards are another good counter. If your opponent wants to make the best out of the extra turn, he'll have to play cards that hurt his own deck. Be careful to not build a super strong deck that can buy many Provinces each turn; but if your opponent can't do more than buy one Province or Duchy on the extra turn, then he's not getting a lot of use out of the Possession. 

If the Kingdom makes it possible to have a deck that can play many Possessions per turn, then the best thing may be to get Possessions yourself and play as many as you can.