Do write for the time limit and
Do build in laugh-time
This one is a big LEARN FROM MY MISTAKES point. This year for PortCon my friend came up with a freaking hilarious skit to do and wrote it up really nicely with tons of great jokes involved. Then we went to record it. Our time limit was 2:00...our recording was 3:30. Several cuts later we were down to 2:00, but everything was packed in so tightly we barely had time to act to it. What's worse, is some of our best material was laughed over, and due to the poor quality of the con's sound system we couldn't even hear the audio and lost our place. It's hard to anticipate laughs, and 2:00 (a common time limit) is VERY short, but you'll save yourself a lot of trouble if you work within those constraints from the start.
I cannot tell you how right this person is. This is also a "learn from our mistakes" for my group as well. Otakon increased their time limit from 3 minutes to 4 minutes. We tried to write our skit at keep it at about 3:30, but that just didn't happen. After we lost two main characters right before the con, our skit was about 4:30, and to top it all off, we didn't have time to rewrite, so we gave all of their lines to us! Then we had to cut and cut and cut and make it about 3:50. So add all of those things together and throw in your skit deleting itself the night before the Masquerade so you have to re-edit the entire thing, which equals a skit that is basically DGJsdGBJKJKSDVJADVSDVJDVKJKSLKJKASHJASFFJAS!!!
No matter what happens, even if you lose main characters right before a con, DO NOT throw their lines at other characters so you can keep in all of your jokes! Either figure out a way to rewrite it, or don't compete[which I'm sure no one wants this option, we didn't after all the work we put into it], otherwise, your skit will be a mess. Four people saying the lines of six characters=a mess, xD.
I think everyone else has cleared up most of the good points. The really important ones are make sure that your audio sounds clear, don't turn your back to the audience unless absolutely necessary, exaggerate your acting. If you feel like an idiot, then you are doing it right.
Another thing I notice is stage-fright. There is nothing wrong with being nervous, it happens to EVERYONE. I was in musicals in high school and have done cosplay skits in front of large audiences for years, and every year, I still freak the hell out, xD. No matter how many times I do it, I still get nervous, even though I know that everything will be fine. In 2007 at Otakon I told my friends that I thought I was going to throw up, but this was our plan. If I had to throw up, I would turn around and do it as nonchalantly as possible, and that everyone else needs to KEEP GOING, and that after I'm done, I'll turn around and continue as if nothing happened. We crack up about it every year, lol. I'm sure the staff would not be pleased with me if that happened. What I'm trying to say is, try not to let it get to you, everything will be fine :].
If something goes wrong in your perfomance, DON'T stop or draw attention to it. Even reacting to a small slip-up and going out of character can ruin the hold you have on the audience. During our 10-steps skit last year Jen lost her wig when we were about to get all "makey-outey", but she waited until we had finished and had a break in our steps to pick it up.