Please advise which version of the question is correct and what's the rule governing it?
3 Answers
The correct form is "What kind of stuff is it?" This is because the order of the subject and verb is reversed in a question.
Almost always if you are asking a question about a thing you will end with "is it?"
The only format of question I can think of ( probably others can come up with other counter-examples ) that would end with an "it is" would be one where the question is of the format "do you know what kind of thing it is?" In most cases a native speaker would be more specific and use "this" or "that" to refer to the object being asked about rather than "it", so a real question might be "do you know what kind of wood this is?" If you look at it, the question is phrased so that it is about the person being asked as much as the object so the format would start "do you know", "can you tell me" or similar. Although conventionally you would expect someone asked this question to tell you about the object you are asking about, they could legitimately simply answer "yes" or "no" as the question is about them. I mention this as an exception - it is not very common.
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2You are touching on the difference between a main clause and an embedded clause. Just to make it more clear cut: if the question portion is in the main clause, the verb moves up. If the question portion is in an embedded clause, the verb stays in place. If there is a question-word (who/what/where/etc), then this always moves up to the head of any clause (in a basic question). Commented Nov 24, 2010 at 14:02
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So that's what is going on. I was sure that a proper linguist ( I'm more of an enthusiastic user than a technical expert ) would have a proper explanation. Commented Nov 24, 2010 at 14:17
The scope of your question is not altogether clear. Given complete sentences, your second example is not a standard English question form, at least in writing. It is a declaration. Nevertheless, adding a question mark at the end of a declaration automatically turns it into a question. Consider:
"This is a soufflé."
"This is a soufflé?"
Both sentences are identical but for the punctuation. But the second has a meaning rather opposite from the first. It may suggest that the speaker doubts that the item on the plate is, in fact, a soufflé, and it may be intended as a rebuke to a waiter for presenting it as such. Or it may mean that the speaker (having never seen such a dessert before, perhaps) is unsure what it is and is asking for further clarification. In either case the question mark trumps word order and automatically makes the sentence a question.
@glenatron posits a situation in which your examples are used as parts of larger sentences, and his answer makes sense and sheds light on the subject, but it's not clear this is really what you asked.
Finally, in the inner-city African-American dialect it is common to reverse copula and subject. Instead of "What am I gonna do with a beat-up old truck like this?" you are likely to hear "What I'm gonna do with a beat up old truck like this?"