Historically, masquerade balls were held by the upper class in Italy during the Renaissance. Today, a masquerade theme can be effected for prom by encouraging guests to dress elaborately, to don masks and to shuck their own identity to try out a new one, if they desire, for one exciting evening.
Decorations should be colorful and eyes-catching, though not gaudy or tacky. The theme of hidden identities can be exploited by creating hidden corners and shadowed getaways behind awnings and curtains for couples to rendezvous.
To fit with the theme of extravagance characterized by a masquerade ball, the food at a masquerade prom should be decorative as well as decadent. Arrange finger foods in creative displays, and rent a chocolate fountain where guests can dip strawberries, pretzels and marshmallows in rich, flowing chocolate.
Set up a station for guests to decorate their own masks to complement their masquerade dress. Provide plain masks and a variety of decorating materials like glitter, fabric, and markers -- do not supply paint because it will not dry quickly enough for guests to use their masks.