Detecting the over current and cutting off the supply
If you don't have very strict requirements for how fast the cut-off is or how sharp it needs to be, polyfuses can be a great way to go. I put them on all of my designs.

They start to shut off when the current going through them gets too high. How fast they shut off depends on how much overcurrent they are. Once they're off, they stay shut off until you power-cycle the board. They're not great for enforcing a precise current limit, but they're perfect for preventing catastrophic failures. 

Here's a sample:

http://www.digikey.com/product-detail/en/MINISMDC050F-2/MINISMDC050FCT-ND/1045862

In quantity 1, it costs $0.35. In quantity 1,000, it's around $0.17. It'll (barely) pass 500mA through it (250-300mA will get through fine), and will shut off pretty hard at 1A. It's dead-simple to use - just put it in-line with your source and you're good to go.