I love the idea of a photobooth at an event. People love taking pictures and posing and being silly in front of the camera, so it almost always works out. I bought a beautiful piece of fabric from a local fabric store with great prices for just $4/yd and hung it on the wall. I bought a dry erase board for about $6 at target and had everyone right a birthday wish to the birthday girl!
I used my DSLR to photograph the pics, but a point n shoot will do too with the right lighting.