photo by JustifiedSinner -- thank you for the awesome photo and your fabulous metalwork!
There are many ways that you can offer items for sale or provide discounts for your customers. I'm sure many sellers have found ways that work for them - these are things that have worked for me or others that I know.
When I have a big sale - I normally like to do a combination of things. Like have a sale section and then something like free shipping on all orders over $100 or an extra 5% off orders over $200, buy 2 items get any sale item at an extra 10% off, etc. try to make it as confusing as possible! ha ha! not that I try to make it confusing, but I usually like to do something a little extra beyond just having items on sale. Now, that is when I am having a BIG sale. sometimes I'll just have a quick little sale and offer a small section of sale items.
I find that having a sale section seems to be the easiest - no one has to wait for an invoice - they know what the price is and what it used to be (I write it in the listing like: "was $78, now only $60!") It is also a reminder to me what to change the price back to when the sale is over.
I always get the best response from my repeat customers (thank you!!!), or people that have signed up for the mailing list but haven't purchased yet. A sale sometimes just gives some one an excuse to buy something they've been looking at - that seems to be helpful for those people that particularly want an item but are having guilt about spending the money. If they get a chance to get some $$ off, they just go ahead and do it. I think this is the kind of shopper I am. Who doesn't love to buy an item on sale?
To promote, I email my list of etsy folks, my personal list of family and friends, blog, twitter, facebook, myspace, change etsy avatar, post in etsy forums and renew sale items every so often so they get moved up to the top and maybe get some more views.
I've done a week long sale and I've done a sale for just a couple days. i think it seems like 2 - 4 days is enough. I email about a week before the sale is going to happen, and then again when the sale starts as a reminder. That way you catch people that might only check their email every few days. Don't inundate you customers though, too many 'sale emails' and I just tend to ignore them all and eventually want to be removed from the mailing list.
Offering discounts is a little more difficult. It will require sending a paypal invoice or sending a refund if the customer paid already. Which is fine, but I like for things to be as easy and efficient as possible. As of right now, the only way I know of using a discount code is for the customer to write it in the 'note to seller' box, and then wait. For customers newish to etsy, it can be a little confusing. Plus, as a customer myself, I like to go ahead and pay and be done with it. I do sometimes have conditional discounts (like my, buy more than $100 and get an extra 10% off) though I rarely do those.