I do almost exactly what Heather does with a couple of minor exceptions:
First, during the pre-flight briefing, I'll tell the prospect that at 400-500 feet AGL, they'll be flying. That usually gets a "What!?", to which I'll reply (with a smile), "Well, I already know how to fly, so I have nothing to prove..."
Second, before the flight, I'll try to find out where they live. If it's reasonable, given airspace and time constraints, I'll have them fly over their house at a couple of thousand feet (this always seems to be a winner).
Third, I'll show them that flying is far safer than the nonsense they've seen in movies. I warn them ahead of time, and, in a safe place (just in case it turns real), I'll "fail" the engine by going to idle. As we glide, I point out that they've just had that myth shattered. Mind you, I only descend one or two hundred feet at most.
Finally, if it's a calm day and they're doing well, I'll back them up on a landing, talking them through it. Often that gets a "Did I just land an airplane!?" and I'll give them an honest answer: "Well, 90% of it was yours, I just helped you a bit with the flare (or keeping the nose straight, etc.)." That also always seems to be a winner.