For my Halloween costume this year, I needed to have a real looking campfire built-in to create the illusion I was outside on a campsite.
Step 1: The Fire Source
I purchased a battery powered $20 prop cauldron with lights, fan and yellow silk "fire," and sunk it into the base of my costume (a large piece of insulating foam board) by cutting out a circle that was a little smaller than the cauldron circumference. I then pressed the cauldron through the hole and covered the insulating foam board the cauldron edges with a layer of paper mache to make it look like ground (I use strips of crumbled, wet brown paper bag painted with wallpaper paste for my paper mache).
Step 2: Final Touches
Once the paper mache is fully dry, the last step was gluing small branches in a criss-cross pattern around the "fire," as well as adding a few leaves/acorns/small branches around the "ground" surface to really create the illusion of outdoors. Stock up with fresh batteries and you've got a fire!