[edit] Steps

Set the mood. Be prepared with a diversity of drinks (both alcoholic and non-alcoholic) and hors d'oeuvres or appetizers. Re-arrange furniture so that your guests will not feel cramped, but everyone has a place they can sit down without being isolated. Dim lighting, candles and fresh flowers can create a warm atmosphere.
Dress appropriately

Dress appropriately. You are the first person your guests will see, so it's important to make a good first impression. It doesn't matter how nicely the party is decorated if you look disheveled or drab. If you indicated on the invitations that it would be a formal event, you should dress up; in fact, you're better off being overdressed than underdressed.
Welcome your guests

Welcome your guests. Greet your guests at the door as they arrive and welcome them in. Offer to take their coats and be prepared with a room set aside to store coats during the party. Tell them where you are putting their coats (and any other accessories, like purses or umbrellas) so if they need something, they know where to look. Send them through to the party room while you put their coats away.
Serve the drinks!

Serve the drinks. As the host, you should always make sure everyone has a drink in their hand. Keep an eye on what everyone is drinking, and walk around with a bottle or a jug of water to replenish their drinks. It's best to fill the glasses up to two thirds. As you're doing this, make sure that no one drinks too much. If you spot someone drinking too quickly, fill their glass half way or less. Likewise, if you see someone is obviously sipping their drink very slowly, perhaps because they don't prefer drinking too much, don't be overly eager to give them more.
Mix people up!

Introduce people. Ideally, your guests will mingle freely without prompting, but more often than not, cliques can form over the course of the evening, with people who already know each other well sticking close together and not engaging others at the party. This can dampen the party spirit, so as the host, look for ways to mix things up a bit. Find two people who you would like to meet each other, and introduce them. Bring up a topic that you know they are both interested in ("Chris, isn't your son applying to colleges? Marly here has a sister who's an admissions officer at Yale. Maybe she can give you some tips!"), or relate one person's experience to the other ("Joan, did you know that Harold climbed Mount Everest last year?). Get the conversation rolling and then move on to mind your other guests.
Have fun!

Enjoy the party!. Your appearance and your demeanor will set the tone of the party, so you must be presentable and sociable from beginning to end. If they see you look tired and stressed, they might feel as if they are burdens. But if you're lighthearted, relaxed, and talkative, it'll help them loosen up and feel at ease. With good planning and preparation, you should have plenty of opportunity to relax and enjoy the party.

[edit] Tips

Do not forget any guest sitting alone.

The art to being a perfect host is in the attention to detail. Every so often look around the room to make sure everyone feels welcomed and comfortable. Don't get so relaxed that you stop paying attention to your guests!
Get help from others.

If you are throwing a large party, you might be unable to do everything yourself. It's not easy for a single host to keep track of everyone at once. Don't be afraid to enlist the help of a few relatives or friends to serve as co-hosts.
If you can afford it, hire an individual or two to help tend the bar and/or walk around the party area refreshing people's plates and glasses and helping keep the party area clean by removing discarded plates/napkins/drinking glasses.

[edit] Warnings

Don't allow an intoxicated guest to drive home. If there is no designated driver, offer to call them a taxi or invite them to stay in your home overnight.