Okay, I used the word "charter" to make this sound a little more fancy than it actually is. The truth is, party buses come in both ghetto and lavish versions.
The crappy ones are like trolleys, or school buses, with bench seating and open windows. The fancier ones are like limos, with big screen televisions, funky disco lighting, stripper poles, sound systems, leather seating, and multiple bar areas.
As you can probably tell from my adoring description, I've only rented the nicer ones.
These are great for birthday parties, pub crawls, or just a wild Saturday night! A regular party bus seats about 20-30, depending on which one you get. Expect a tight fit if you fill it to capacity, but it really won't matter, because if you play the right music, it will erupt into a dance party pretty quickly.
Both buses I've been on had an Ipod dock, so make a great dance mix and you'll be set.
Meeting at a bar and having the bus pick you up there is the best way to do this - that will lubricate the way for the guests, who will feel more at ease jumping into the wild light show if they have already had a couple of cocktails.
The place I most recently rented from here in Chicago had the most luxurious buses around, so I would recommend them: Emperor Limousine
There were other companies that were cheaper, but after some research I learned that their buses were older and did not offer a lot of the same amenities (light up stairs?! we needed those!).
A word of caution - negotiate! The advertised rate for a lot of these places is $250 or more per hour, but I ended up paying about half of that because I negotiated. Also, check to see if a tip is included for the driver. Most places have a "will match any price" listed on their sites, so they expect you to forward them quotes if you get a better one. Create a bidding war!
As far as what to do once you are on the bus, that's up to you! A bar crawl is the most obvious choice, but you could also just drive around the city in your party on wheels.
If you do decide to do a bar crawl, I would suggest getting a megaphone to keep track of your guests. It's easy to lose a liquored up party guest, especially in a crowded bar. This was a smart purchase I made a few years back, and it has come in handy more often than you might think:
The bus will come equipped with soda, water, and ice, but you will need to bring your own booze. I would also bring extra cups for mixing drinks if your friends are as thirsty as mine.
Finally, here is an example of how not to leave your bus, if you want to avoid an exorbitant cleaning fee!
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