80% of success is just showing up.
My participation policy has evolved over my teaching career. Currently, I do not give a grade for "participation" in any intro (100- or 200-level) classes. The reasons why: 1) My intro courses have 60-70 people in them, and I don't want to waste class time reading an attendance sheet; 2) passing around a sign-up sheet allows people to come in 15 minutes late and just snag the list, plus it takes my time to put the names in the computer, and interpret illegible handwriting;
Most importantly: 3) I can't base a daily participation grade on anything but pure attendance, since I can't learn 70 people's names quickly enough to grade their participation in discussion. From my perspective, showing up isn't enough to count as "participation". I refuse to give students credit just for coming in the door. It's like paying someone a bonus for coming to work, whether or not they do their job while they're there. It should be free points, and if it's not, then the student's lack of attendance should be reflected in their grade. If neither of those things is true, then I'm doing something wrong.
On the other hand, I learned the hard way that if I don't include any incentive for attendance and participation, I'll have half-empty classrooms. Granted, most of the absent students will fail the class, but that's hardly a "win"! I have two strategies for fostering participation. In my Intro to Bioanth class, I give 10 pop reading quizzes over the course of the semester. They take place during the first five minutes of class, so if a student is late, they miss the quiz and all of the points. They don't know when I'll give the quizzes, so they need to show up every/most days. As an extra bonus, the quizzes encourage good reading habits! They also foster real participation, as the last question of the quiz requires a short paragraph answer. For example, today they were asked, basically, whether sociobiological explanations of infanticide bothered them. They aren't graded on their answers to those questions, but after the quiz, I use those paragraphs to start in-class discussion on the topic.
In my Intro to Cultural class, I have a different approach. I have 10 in-class activities, each with a short write-up, where the student reflects on what they learned. For example, when we talk about kinship, we do an in-class activity building our own kinship charts, and then the students write about what can be learned from them. The students don't know when these activities are scheduled, so they need to show up to class, or they will miss them. It is not possible to make up the activities. The activities not only tell me who is in class, but also foster real participation and learning (I hope).
Both the quizzes and the activities are worth 10 points each, so over the course of the semester, they are worth as much as an exam, and constitute about 20% of the class grade.
I'm generally happy with this approach, except for one thing: it doesn't keep students in class! My colleagues who read through a list of names at the beginning of class have much fuller classrooms, even if participation counts for less of a student's grade than my quizzes and activities! Apparently, the daily roll call is far more motivating than the risk of losing a significant portion of your grade by not showing up one day of the week. Even when I point out that there are only 30 class periods, so 10 quizzes or activities represent a lot of the class, I find that attendance drops off precipitously after the first few weeks. Perhaps this is part of the human inability to accurately assess risk? Or is it a reflection of the shame culture of a small, close-knit college campus?
Oh, well. At least the students who are coming to class are being graded for "true" participation.