Also known as the Fancy Dress competition.
Usually held on the Saturday night, usually starts late and ends later than scheduled ... sometimes followed by the convention disco (not all Eastercons have a disco-type event, but it is usually enjoyed if it is there).
In recent years a Cabaret has sometimes been added before or after the Masquerade, where fans can sing a song, perform a short comedy skit, read a poem, juggle or perform a dance.
Hall Costumes
It is true that some people wear costumes just to attend Eastercon - even if they are not participating in a formal Masquerade. This is generally known as a Hall Costume. They may be wearing a costume specifically from a film or tv programme, or it may just be something out of the ordinary that you might wear to a party. There is nothing to say that you *have* to wear a costume, but there should be a "live and let live" attitude to those who do want to.
Hall Costumes are perhaps the best known aspect of conventions outside convention members because it is usually all that the Public Media focusses on.