The goal: The main thing to keep in mind, and to apply to every aspect of your time at the table, is that you are a teacher, and the key criterion of a good teacher is not how good they are, but how good they can make the observer or student. After watching you, can your audience tie the fly after they get home? If this is your guiding principle, if you reflect how your teaching techniques accomplish this goal, and how other demo tiers do it, you will develop into a great demo tier.
Experience: If you are competent and confident, you can be a good demo tier. You do not need to be at the "master" level, but you do need to know how to tie and be confident in your tying.
Choose your topic carefully: Pick a fly or technique for which you have great expertise, one that you have a lot of enthusiasm about, and one that has broad appeal. Think about what you want the observer to learn from your demonstration, and plan accordingly.
Be prepared: Have all the materials you need right at hand. Many experienced demo tiers have at their table just enough materials to tie a morning's worth of flies, packed in a ziplock bag. Nothing distracts observers more than having to sit through your poking into a dozen boxes looking for the right material! Nothing will frustrate you more than not finding it!
Display: Have a display of your flies, stages in the tying of your fly, the techniques used in your fly, or something that is realted to what you are teaching. This allows passersby to understand at a glance what you are teaching, and they can quickly decide if they want to stop at your table. Also, observers who come late can quickly understand what is going on. There are many different approaches to displays and each has its own unique strengths. You can be creative but keep the theme of teaching at the forefront. (A display of every fly and every flybox in your kit is probably not the best way to teach.)
Communicate: Be sure to explain each step, material, the selection of just the right feather, etc. It may be obvious to you, but it might not be obvious to your audience. Find out what level your audience is at by asking questions as you teach. Direct your comments to their level, not yours.
Engage your audience: communication needs to be two-way. The best way to understand your audience's skill level is to ask. The best way to find out if they understand what you are saying is to ask. Dialogue with the audience, as long as it stays on topic, will always strengthen your teaching. (But avoid going too far afield.)
Table setup: be sure to keep the audience in mind when you plan your table setup. Keeping a clean table helps to keep the audience focused on what you are doing. Provide a good light for the audience as well as for yourself.
Your appearance: You may be on vacation, but you are representing the FFF (or whatever group invited you, at other venues). Be neat, shave, and clean your nails. Your shirt is the fly's background from the audience's point of view, so wear a light-colored, solid (not patterned) shirt. One might think that some tiers are trying to provide protective coloration for the fly because they are wearing a paisley shirt in the same shades of color as their flies!
Handout: The tiers at the workshops had a lot of discussion on this topic, but the general consensus was that audiences love getting a handout. Handouts are optional, not mandatory, but the demo tiers are the ones who have come to the consensus that they are a great idea. The criterion for a good handout is not your artistic skill, but how it will help the observer to tie the fly when they get home. The handout will be greatly enhanced if you include drawings or photographs. (If you need help, there is always someone in your club who has the necessary expertise with a computer or camera.) The Board of the Fly Tying Group has assembled some examples of good handouts.
Give away your flies: We all love to get something free, and something special & free is even better. Remember when you were beginning, how much you liked to get a fly from those "famous" fly tiers? Sometimes it is interesting trying to find a good compromise between talking and demonstrating, and yet still getting the fly tied so you have something to give away. If you have some material samples to give away, that also is quite valued by the observers.