Nothing beats actually going out to karaoke nights for practice, but you can also practice at home on your own karaoke equipment, or you can find lyrics and karaoke MIDI files on the Internet.
If you have an Xbox 360, Wii, Playstation 2 or PlayStation 3 system, rent or buy Rock Band or Rock Band 2 (the latter has a no-fail mode) and get any USB microphone, and start a vocalist career. Start with Easy and move up as you learn. This software provides the correct tone and pitch and shows where you're at. Change the settings to turn down the vocal track, the crowd noise, and sound effects, and turn up the mic - this will turn the software into a true karaoke platform. (Do not, however, use Guitar Hero: World Tour as its vocal interpreter is basically broken and it will rate you far worse than you actually are. Not to mention Rock Band 2 will tell you how hard a song is to sing; Guitar Hero: World Tour will not.)
When you're practicing, have a friend or two go with you to karaoke and honestly critique your performances. You can't always judge your performance accurately, and unless you're in a competition, it's tough to get a good idea of how well you're really doing.
Get hydrated well in advance. Drink plenty of water before the competition, and maintain your hydration throughout. Nothing can sabotage your singing like a dry mouth.
Choose songs that most everybody knows. People generally get into a song that they recognize and like. Obscure songs aren't off limits, but only choose one if you have a good reason (i.e. if you can yodel well, you might want to choose a less well-known song with an amazing yodeling part).
Watch what you eat before and during the event! Cream based foods, like dips and sauces, can coat your throat and make singing more challenging. Also be aware of dry foods, like tortilla chips, that can create a "tickle" and make you need to clear your throat.