Base your character and costume on a well-known role in dance or theater. Your costume should be reminiscent enough of the original costume that audience members either recognize you right away or say "Of course!" when they read your dance title. Look for characters that have very recognizable ensembles. For example, Madame Thenardier from "Les Miserables" and the Polichinelles from "The Nutcracker" have distinctive outfits.
Turn to popular culture for inspiration by grabbing your character from a book, story, movie, television show, comic book or other medium that is well-known. Try to capture the character in your costume or copy elements of his or her costume. For example, The Mad Hatter from "Alice in Wonderland" should sport a vividly colored top hat, tails, ascot and slacks, while Arwen from "The Lord of the Rings" would require flowing gowns in light hues.
Making up your own story allows you individuality and creative flexibility. Choose a theme or character that is general, and make up a story about him. Many of these costumes can be cobbled together from common clothes with details added. For example, if you are telling the story of a soldier, khaki shorts, a button up shirt with insignia ironed on, and a canteen can convey the character, while a maid may wear a black skirt, puff-sleeved fitted black shirt, doily on her head, and a white apron, with a feather duster as a prop.
Browse through costume shops or catalogs for ideas that you can twist for a new take on an old idea. For example, a typical "Little Red Riding Hood" costume might consist of a hooded red cape, dress, braids, picnic basket and sandals. "Little Red Riding in the Hood," however, could consist of red hooded sweatshirt and parachute pants, cornrows, a "blinged-out" picnic basket and red pointe shoes or dance sneakers.