I've been playing guitar for 12 years, dabbled in a bunch of bands (good and bad). Every person is different, and what works for one band may not for the other. But here are some things that experience has taught me that will make your band practices effective and your band even better:
1) No alcohol (or other drugs) at practice!
I know this may seem like blasphemy, but I have seen more bands destroyed by alcohol than anything else. If you are going to be pushing each other to improve, critiquing each others songs, tensions are going to run high at some points even while sober. It's healthy, and it happens. But with alcohol in the mix, it makes people say stupid things, it makes them do stupid things, and generally leads to a lot of bickering and in-fighting that should not happen. You wanna sit around and have a few afterwards? That's cool. But showing up or getting trashed during practice only leads to trouble, and it doesn't make you play better.
2) Beware of the musician who says "I'll play anything"
First off, this statement screams, "I just wanna play and make money." If you find someone on Craigslist or know somebody who says this to you, be wary about bringing them into the fold. I've seen this happen too. They say this, then you present a blues song you wrote, and then they say "I don't like blues." Ok, then you just contradicted yourself. Or worse, they play it even though they hate it, and then they quit with no warning because they hate playing the music. Not everybody in the band has to like all the same bands, or even like all the same styles you do. But you need everybody to at least enjoy their own parts, and dig what you do.
3) Work with people you would normally associate with
If you are clean and sober, and you are playing with a bunch of junkies, things probably will not go so well. Ask yourself if these are the type of people you would hang out with on a Friday night if you didn't know them through the band. If the answer is no way, then this isn't the band for you. Even if the music is great stay away. #4 explains why...
4) Bond as individuals outside of band
Go bowling once a week. Go for pizza on Friday nights. Hold a movie night every now and then. Go camping once a month. Just enjoy hanging out outside of the band setting. You don't have to be the best of friends, but remember that you are going to be working with these people, a lot. You're going to be criticizing each others work. If you can't get along as people, then there is no way this is going to work.
5) Be honest with each other, brutally if need be
This is where #4 is most helpful. If you really don't like a song, speak up. If somebody is playing something wrong, tell them. Don't just call them an idiot and tell them the song sucks, be constructive and tell them WHY you don't like it. If you get along well with each other, this kind of criticism won't be taken personally and will improve the songs your band is putting together. If you are the kind of person who does not respond well to criticism, music may not be your thing.
6) Find out what everybody's ideal goal is
Do you want to sign to a major label and end up on MTV? Do you want to sign to a smaller label, but have more control over your own music and image? Are you just looking to gig once or twice a month? Having different goals in mind is not a band killer in itself early on, but if everybody is not on the same page when things take off, it can lead to trouble.
7) Take practice seriously
Practice can be fun, but if somebody is constantly showing up trashed, showing up an hour late, or just not showing up without a phone call, it ruins practices and needs to be fixed. If it's you, you're killing your chances of being in a successful band. For some reason, musicians seem to think that this is ok behavior (and for some reason, it's often the drummer:-p). People who are unreliable or cannot be counted on don't last long in new bands. Also, if you aren't going to be at practice, have a good excuse. People get sick, you get stuck at work, relatives pass away, the car's transmission falls off, hey it's ok just call and let people know. But excuses like being hungover, not feeling like it, or my girlfriend and I had a fight 3 days ago and I still feel kind of bummed out (real!) are not going to fly.
8) Don't do it for the money
Seriously, doing it for the chicks is a better idea than this. If you expect to make money playing music, odds are that you are going to wind up disappointed, frustrated, and bands who do it for the money often don't get along when there isn't any to be had. Cover bands may make a little bit to start, but won't get the good gigs until they build a good reputation. Original bands, don't expect to make anything in your first few gigs. You know why AC/DC can charge $90 a ticket? Because they're AC/DC. This is a business where there is a direct relationship between payment and reputation. People aren't likely to pay a $5 cover charge for a band they never even heard of. Plus, bars aren't going to pay much if they are unsure if a band will draw a crowd. Some money is nice, but it's takes time and patience before you can even earn a little.
9) Love the music
If you and your band can't be happy playing what they do, all the other tips are null and void. You cannot enjoy doing what you do if you don't enjoy what it is that brought you here in the first place.