Create a syllabus that outlines the topics covered in class, as well as the expectations for class participation. Attach a grade to participation so that students know it is an integral part of the class. This will help engage the students in each lecture.
Avoid dead time by limiting the time spent on pure lecture without class participation. Students tend to lose interest when not actively engaged by the professor. Engage students by regularly calling on them to offer input and respond to questions.
Promote discussions where students break out into smaller groups and discuss a topic at length. Call on the groups to present their ideas. This not only encourages participation, but also gives students time to prepare their answers. Relieving some of the stress of having to quickly formulate responses will build students' confidence.
Assign point values to work done in class or homework. Show students that their grade is based both on participation in class and completing assignments. This provides an alternative form of participation since some students may not like answering questions in front of their peers.
Change your teaching technique regularly to keep students from getting bored or complacent. Students adapting to a singular teaching style may lose the incentive to participate. Alternating between techniques, such as a lecture/discussion format and small group presentations, keeps students on their toes as they don't know what to expect. This stimulates the mind and encourages active thinking.
Limit the information provided in handouts. Too much material in handouts can diminish the importance of the lecture and cause students to assume they don't need to listen to get the information they need. If the lecture remains the focus of the class, students will continue to come and participate knowing their grade depends on it.