Last week I attended the workshop given by Microsoft for partners called "demo2win". The workshop was focusing on the "soft skills" and demonstrated how to make a good demo for potential customers.
For technical consultant as me it had some very nice eye-openers. The saying "less is more", often heard, proved to be truth. Technical consultants tend to be demonstrating all kind of technical stuff and also expect that offered functionality is as easy for everyone as for them, but in fact for the newbie it seems often to be too difficult or too confusion.
One of the most common pitfalls is not to use "tell-show-tell". First tell the story, demonstrate it with example (keep it simple!) and afterwards tell what you have done. The story you tell should be recognizable to your audience, so they can identify them self as (new) user of the application.
More tips about improving your demo skill, I surely could advice to follow the workshop (contact your Partner Account Manager for details). The workshop is also available in elearning section of partnersource.
Start to practice :-)