Just a couple things I've found that help:
1) Start by looking over the audience while singing, and lower your eyes little by little.
1a) if there are any little kids in the front, bouncing you what you are playing, look at them. They feel special, and their parents will thank you.
2) If you make a mistake while playing, repeat it. Now, it is no longer a mistake, but a feature of your arrangement.
3) Don't be afraid to close your eyes. Sometimes, I have to do that to visualize the lyrics. I used to have to do it so that I would remember to breathe. Do it for whatever reason you need to. I can assure you, some people will see you doing that, and think it is cool, while others will think you are trying to be Jerry Garcia. All that matters is that you are doing what you want to do.
4) Whatever works, works. If that means visualizing your audience in their underwear, that's fine - but do it during a funny song, because the thought of some of those people nearly naked will make you want to laugh out loud.
5) Have fun. It is neither rocket science, nor brain surgery. it isn't even Brewing Coffee for a drive through at Morning Rush Hour (and I could tell you stories about that!); It is just having fun with your instrument.