To masquerade means "to pretend to be someone else." If you masquerade as a sweet, kind-hearted person, you present that image to the world, hiding your true identity as a jerk who has rage issues.
As a verb, masquerade can also mean to dress up as someone else, in costume. At the parade, you will masquerade as the court jester, wearing a purple outfit and bells and tossing candy to little kids. The noun masquerade refers to both your costume, which usually includes a mask, and the event where you will wear it. The fun is in hiding your real identity for the night.