A masquerade is, in it's simplest form, a costume competetion. There are many aspects to it, though, depending on the convention. Some have workmanship judging, in which you can have the quality of your costume judged, and some don't. Many people enter short skits, in which you act out something/perform something while in costume, to show it off. Others just walk on and pose to some music. Some conventions only allow walk-ons, either due to the number of entries, or just that's the way it is. The judging style changes from convention to convention as well. Some use International Costumer's Guild guidelines (ICG), while others don't.
These threads have more information:
Hope that helped some, and welcome to the cosplay community!