You will need to have a decent amount of traffic to your blog before you start having evil little contests but giving things away for free is an excellent away to have others help with your link building or some other aspect.
Johnchow had an evil gimmick in which he calls Make Money with John Chow where you would write a small blurb about Making money with John Chow and link back with his trackback url. In return he would give you a link back to your blog which can generate some nice traffic and more importantly give you a link from a high page rank bog.
Shoemoney has a contest in which you can send him a t-shirt and he will take a picture in it and post about it. Jeremy is another power house blogger these days.
Another good idea for a contest is to give away your products. If you have products that you offer why not give a few away and generate a little buzz. You could even give them to other blogs to give away on their site. They write about the contest, then their readers write about the contest and next thing you know you have a lot of buzz about your product or site.
Just remember to structure your contest around your readers and products to generate the most buzz.