There have been some great responses already, but another cool way to pull this off could be a series of short skill challenges that is disguised as one, giant skill challenge.
What I mean is, let's say the general goal is to track someone specific down in this masquerade festival. The skill challenge template would have a bunch of abilities that all work toward that in a generic way but count as a mere 1 of X successes. For instance:
Perception: Notice the type of mask you're looking for, eliminating a large amount of people in the crowd.
Diplomacy: Ask a random passerby if they've seen your mark, getting pointed in the right direction.
Intimidate: Shout at those in front of you, clearing a way through the crowd and bringing you closer to your target.
Basically, no one is moving and they're all just kind of chilling at the table, making rolls. That kind of stuff is fine for, say, disarming a giant arcane bomb or complex trap - but when you're trying to give a feeling of progression, it comes off as a little stale.
So maybe there are several small, shorter skill challenges that the characters can fail, though failing doesn't hinder their overall progress in the skill challenge so much as slow them down.
For instance, let's say there are multiple phases to this skill challenge and each one has a consequence for failure that adds a small obstacle in their way. Succeeding on the skill challenges instead lets them avoid that obstacle and feel like they're smooth and catching up faster than otherwise.
The most important thing (in my opinion) for running something like this is that there be an actual map or some kind of terrain so the players get the feeling that they are making physical progress towards their goal. But that's just me!
ALSO, I read this advice somewhere and it's amazing for running skill challenges where everyone contributes. You give everyone at the table some kind of token, and each round, anyone can go in any order, tossing their token in the middle when they've gone. No one can go again until everyone has turned in their tokens, then everyone takes one again. I think I read this on enworld somewhere, but I can't remember where so apologies if someone knows where it came from.
Feel free to change any (or all) of the skills and add others in. I traditionally only let players roll or assist on skills they are trained in, which forces many of them to use the +2 assist on their turn to help someone else. I didn't add in any of these secondary skills below to save myself some time, but I'd normally toss 2 or 3 into each phase.
Anyway, ready set go!
Phase 1: The Festival
The players rush into a festival street, hot on the heels of their target, and are taken aback at the unexpected festival and all the confusion. Describe the location to them and let them know they need to catch their mark, but first they need to catch their bearings.
Objective: Figure out which way their target went by inspecting the area and talking to revelers.
Primary Skills: Diplomacy (talking), Perception (notice something knocked over/out of place), Insight (see people staring at the mark who just ran past), Streetwise (notice likely routes the mark took).
To Succeed: Players succeed when they make 3 successful checks. If it takes them more than 6 primary skill checks (because they fail some), then count it as a failure. You still move on to phase 2, but apply the penalty below.
Success: The players determine the most likely route of your mark's escape and catch a glimpse of him slipping into an alley.
Failure Penalty: The players follow the wrong path, ending up in a dead-end. A group of thugs try to rob them, starting a very quick encounter against some weak thugs. As they exit the alley, they catch a glimpse of the mark slipping into an alley.
Phase 2: The Alley
The players slide into the alley, which is filled with debris and more difficult to pass than they originally thought. The mark deftly bounces over the junk, slipping between crates and barrels as he tries to escape. There are many obstacles in the way and no turning back.
Objective: To move quickly through the alley and catch up with their mark on the other side before he leaves their sight.
Primary Skills: Athletics (knock over debris), Acrobatics (kick off the wall to avoid obstacles and gain on the mark), Perception (step where the mark steps to avoid obstacles), Arcana (magic lamps line the alley, you call on the arcane to turn them brighter, making it easier to see your way).
To Succeed: Players succeed when they make 3 successful checks. If it takes them more than 6 primary skill checks (because they fail some), then count it as a failure. You still move on to phase 2, but apply the penalty below.
Success: The players exit the alley, right behind their mark.
Failure Penalty: The players are exhausted after moving through the debris, though the mark is still in sight. Each player loses 2 healing surges.
Phase 3: The Market
The mark slips into the bustling market, escaping from sight. You can see every exit for the time being, but you need to do something to break up the crowd and make it easier to find your mark.
Objective: Cause a panic in the street to scatter the revelers and reveal your mark.
Primary Skills: Intimidate (shout and push people aside), History (you recall that this town has a history of being attacked by whatever, and start screaming that they're here), Diplomacy (you shout that a tavern is offering free ale, convincing everyone to run to it), Thievery (you start snatching purses, pretty soon someone screams "pickpocket!" and they start dispersing to avoid being robbed).
To Succeed: Players succeed when they make 3 successful checks. If it takes them more than 6 primary skill checks (because they fail some), then count it as a failure. You still move on to phase 4, but apply the penalty below. After each success, narrate that the crowd has dispersed some, but more remain (until they reach 3 successes).
Success: The crowd breaks apart, revealing your mark ducked down in the middle. Upon seeing you, he breaks for the main park holding most of the festival goers.
Failure Penalty: Two possibilities. 1) If the players previously had to fight off the thugs, then have the thugs' friends recognize the players, who are taking too long to break up the crowd. The thugs attack, slowing the players down, though they see the mark taking off in the direction of the park. or 2) A couple of guards come over to quiet the players down, thinking they're drunk and belligerent and threatening to toss them in a cell. The players can fight the guards off (or kill them, if they're horrible people) or bribe them. The last thing they remember is seeing the mark run toward the park.
Phase 4: The Park
The players enter the park, which is filled with countless masked revelers, all wearing assorted colorful outfits and masks. They spot the mark as he grins and dons a mask, disappearing into the crowd. Fireworks explode overhead and the music is deafening. There's no way to disperse this crowd with violent actions - time to find the needle in the haystack.
Objective: Move through the crowd and locate the mark before he manages to slip past the party and escape.
Primary Skills: Perception (quickly scan the faces of the crowd, hoping to recognize the mask), Insight (study the crowd's movements, looking for anything out of place), Religion (call upon your god to guide you to your quarry), Stealth (quickly slip in and out of the crowd without hindrance, getting a close look at everyone), Acrobatics (you balance on several lamp posts and high objects, gaining a better vantage point).
To Succeed: Players succeed when they make 3 successful checks. If it takes them more than 6 primary skill checks (because they fail some), then count it as a failure. You still move on to phase 5, but apply the penalty below. After each success, narrate that the players spot him for a second, narrowing their search to a smaller area (until they reach 3 successes).
Success: The players have closed in on the mark, who notices that he's been surrounded.
Failure Penalty: No penalty, it just takes them longer to find the mark, and they finally surround him.
Phase 5: The Rooftops
Just as the players surround the mark, a firework backfires and explodes, covering the crowd and players in a cloud of smoke. As it clears, they notice the mark scaling a ladder used to hang lamps, and he begins running across the rooftops toward the city's exit.
Objective: Get on the rooftops and catch the mark!
Primary Skills: Athletics (jump across a gap between two buildings), Acrobatics (balance as you cross a building gap over a narrow beam), Insight (guess which roof the mark is jumping to next), Arcana (more arcane lamps line the building side, you briefly control and raise them, running across the tops to another building), Intimidate (you shout threats to the mark, who slips and gives you time to catch up).
To Succeed: Players succeed when they make 3 successful checks. If it takes them more than 6 primary skill checks (because they fail some), then count it as a failure.
Success: The mark runs out of rooftops to cross, cornered. You've caught him. Now fight him or do whatever!
Failure: No failure, but narrate it as though the mark was about to get away right before they got their last success. They catch him.
Or something like that! I also like the turn-over card game idea, but I usually lean toward more movement/action-y kind of challenges.
Sounds like a great first skill challenge.
