For the uninitiated, "Cosplay" is short for "costume play" and is the anime-convention equivalent of the masquerade. Cosplay tends to be much more focused on the characters -- interactions AS the characters rather than APPEARANCE of the characters -- than standard masquerade is.
My qualifications for talking halfway authoritatively about cosplay are these: I ran one large Cosplay (and almost went nuts doing it; I could do MUCH better now), and participated in several. For a few years, my wife Kathleen and I were part of the most infamous cosplay group on the East coast; we were probably responsible for the strong following it has today. Our famous skits were The Great Dragonball Skit (probably the most ambitious skit ever attempted on this coast, and unfortunately likely to never be performed in its entirety), the Sailor Stunt Doubles, and the Saint Seiya skit. All of these won their respective cosplays (the judges overruling the ground rules in the first case, to the great surprise of me, the cosplay director).
For those planning in participating in a Cosplay, there are some hints and rules I'd pass along. Some are obvious, some perhaps less so.
1) No costume is "No Costume". I don't know any venues which permit proper cosplaying of Kekko Kamen, so don't try that or steamy scenes from your favorite H anime.
2) Funny is easier to do; serious will get more attention. There are two constraints on Cosplay which favor comedy: time limitations and character. Serious stories generally demand character, scene establishment, conflict establishment -- in essence, they're a story. Comedy can avoid story entirely and go for slapstick or a rehash of known scenes. This doesn't mean that you cannot use humor in a cosplay, or that a purely funny cosplay won't work well, it just means... if it's funny, you're (A) probably doing something very much like something someone else has already done -- a lot -- and (B) you're competing directly against everyone else who's trying to be funny. On the other hand, doing a serious cosplay will require a lot more thought and careful rehearsal and timing. Comedy relies on timing too, but don't underestimate its use in drama or melodrama.
3) One jerk can spoil things for everyone; don't be the one jerk. This phenomenon is most noticeable in costume restrictions. In the Old Days -- which vary for each convention -- people could wear anything and carry anything. Now, at many conventions, you can't carry anything that even LOOKS like a weapon. At one cosplay I was at, one set of idiots (I use the term advisedly) brought live steel (i.e., usable, sharp weapons) on stage, swung them around, used them to cut a melon, and left the mess on stage. One can guess what rules were instantiated next time.
4) Two or three minutes CAN be a VERY long time. Yes, it's easy to expand a skit that has a lot of people to 15 minutes -- which you will likely never get. On the other hand, a number of us have had the experience of having someone on stage doing a monologue that they thought was dramatic or funny, and having it fall flat... and having the person drone ever on. KNOW WHEN TO STOP. Test your routine out, preferably on some people who DON'T know you well.
5) KNOW THE RULES. Cosplay is NOT a regulated form of activity. The rules will be UNIQUE to each cosplay. Some will allow a flat 4 minute maximum for any group. Others will allow 2 minutes for one to three people, four minutes for larger groups. Some cosplays will require you to show up and describe, or even act out your cosplay beforehand so that they can verify it fits in their limitations. Some allow "hooking" or "gonging" -- i.e., yanking dragging performances off the stage. Some will permit combat or special effects to be arranged on stage, others wouldn't DREAM of it.
6) PREPARE AND PRACTICE. The fact is that one of the biggest killers of many skits is that someone forgets a line, doesn't do a move, or miscues. Practice as much as possible. Preparation can also include making up a CD or tape of music or sound effects which are part of the performance; SOME cosplays will allow you to give these to the sound crew. HOWEVER... be prepared to continue on without the effects, as sometimes signals get crossed and your cherished CD or tape never gets played. Or plays at the wrong moment.
7) Be CONSIDERATE of the audience. Anime is no longer a mostly-geek preserve with adults, or near-adults, making up 99.9% of the audience and the rest brave and intrepid souls willing to be associated with such people. At one cosplay during Pokemon's heyday, there were several skits essentially consisting of hatred and abuse towards the poor little animals and even the entire show. There were a lot of kids and parents in the audience who found this offensive, as they should have. It's one thing if the audience you may offend is adult; S**t happens and not everything will be politically correct. Kids are a different matter, and things that beat directly on their preferred material, or which are overly violent or risque, just are bad taste in an unrestricted public forum.
8) If you're RUNNING a cosplay, be considerate to the PLAYERS. Let's face it, many of these people are here SPECIFICALLY for those two to four minutes where they get to strut their stuff. Try NOT to make them uncomfortable. One cosplay I was at required the cosplayers to be there for preregistration, perform their routine, then come back and be waiting for a LONG time before the cosplay; in essence, I had to spend the ENTIRETY of Saturday on the Cosplay. This is, not to mince words, stupid.
9) Decide where you shine, and take advantage of it. Some people make GREAT costumes. Other people play GREAT characters, or have great comedic timing. You can make up for a so-so costume by projecting a great character. Conversely, if you can't project character well, making a dynamite costume will make it work anyway.
10) There's no shame in getting help. If you need it, get some, for lines, for moves, for costume design, whatever. There's plenty available.
11) THIS IS NOT YOUR LIFE. You will lose. I've lost cosplays, shocking though that may be to some who know me. You will have routines fall utterly flat. Don't let it depress you. Have fun BEING on stage. (if you don't like being on stage, for gog's sake what are you DOING in a Cosplay?)
12) Beware The Popular. Some people forget that yes, we HAVE seen every possible incarnation of Ranma. Yes, really, I've seen Goku being kicked by ChiChi before. Angsty Harlock has been DONE. Rei Ayanami is passe. It's still POSSIBLE to do good cosplay with something that people have seen a billion times before, but it's a LOT harder.
13: Cosplays are judged on several criteria. Versimilitude of costume is only one, and to my own mind NOT the most important. Oh, if that's what you're INTERESTED in, or what you want to compete in, it's certainly the most important, but the point of getting up on stage would seem to be to make a presentation. If the costume was the only point, you could put it on exhibit in the Art Room. To me, it's what you do WITH the costume, and this is one of the other criteria. How funny or moving or interesting was your skit. What interpretation did you choose for your character, and how well did you project that interpretation? How well did you manage to "become" the character for the viewers?
14) Smaller conventions tend to be more fun. While it's nice to have conventions that reach the multiple thousands in attendance -- it shows our hobby has grown well -- the fact is that you'll be likely to have more time, more freedom to perform, more attentive audiences, and more chance for recognition in smaller conventions.
15) HAVE FUN.