h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Stagefright is something that you may never overcome. I used to be in a band and before every gig the only way I can describe how I felt is 'terrifed and nauseous'. During our actual set, however, the elation of being on stage and performing usually chased the stagefright away by the second or third song.

If you still cannot get rid of the stagefright even during your performance don't despair... it never stopped Gary Numan getting famous!

Stagefright is normal. Don't worry about having it. There are people out there in the theatre or wherever you are, that are actually interested in what you are going to do: perform.
I have been in a band (a small one in school, but we stayed together a few years after graduation) and we had a few songs of our own, and we played covers. Usually, we were frightened to go out there every time, but that faded during the first song. It would come back however when we were going to play the first of our own songs.
You are in the spotlight, and everybody is looking at you. Or are they? If you play music people dance to, as we did, the audience is not looking at you, but at the person(s) they are dancing with. That gets you off the hook, and you can start enjoying yourself by watching them instead.
Once you notice they can't dance (if they can, look harder) you will feel more comfortable up there.

at my first show I was incredibly nervous, but, as previously stated, the elation of being on stage and the knowledge that everyone there was there to listen to you, just drove it away and I had a great time

I used to be drunk on all my shows before, and for a time I thought that I would be nervous if I had to go up there sober. But once I tried I realized I was as calm as always.

Actually, I've never had stagefright (well, maybe the first two or three shows I ever did), although I'm quite a shy and quiet person otherwise.

Still, I've find that I sing and perform a hole lot better after a few beers!

Yeah, I used to drink lots of beer before every show. I think this is a tactic used by a lot of bands.

Another bit of advice, don't imagine people naked/in their underwear. If you pick out someone hot in the crowd this could lead to more uncomfortableness/discomfort (especially if you play a guitar). Or if they are not so hot, it could lead to more nausea.

My advice, concentrate on what your doing at the start, get into the music. You will then relax and enjoy yourself.

Now look at the crowd, hopefully they are enjoying themselves too, if not, repeat step 1.

An excellent resource for becoming a better musician and tackling stage fright is "The Inner Game of Music" by Barry Green (New York: Doubleday, 1986).

My favorite techniqe that the book suggests is to select one component of the music to focus on: articulations, dynamic contrast, breath support, steady tempo, or anything else you could improve. Then, during the performance, work on that one component. The simple concentration helps to drown out that negative inner dialogue that causes stage fright. As a bonus, your mind (being the mind-bogglingly excellent tool it is) will take care of the music you're not concentrating on, probably better than you would yourself.