Just ask questions, usually a conversation can be formed from a well placed question or two. Use the day, time and things around you to help think of questions. For example, if it's near the end of the day, ask if they have any plans after work or whatever. If it's Friday, ask if they have any plans for the weekend. If it's Monday, ask if they did anything interesting over the weekend. You get the idea.
If someone thinks you're a bit nosey, which they won't if your questions are just gentle small talk, I tend to go with the 'I just think you're interesting' line, which seems to go over pretty well, at least with the ladies.
Generally, I tend to keep a small bank of stories in my head which are almost guaranteed to be interesting or funny that I can drop into conversations or use to start them. If you vaguely keep up with the news or read some half interesting websites then you should be able to get your own bank of stories.
I also carry around a moleskine notebook which I use to save funny/interesting thoughts, write down ideas, jokes, and other things that I may want to use socially. At first your conversations might feel slightly robotic and unnatural, but gradually as you get more confident with that person or with yourself everything will be a bit more fluid, at least thats how it seems with me.
One big problem that I find social anxiety causes is the over analysis and obsessive thinking that hinders normal sociability. If you focus too much on something then it is hard to appear natural and normal, causing you to focus on it more and a horrible cycle ensues. Therefore I find that if you start off being methodical by memorising stories, carrying a notebook with social stuff in, asking lots of questions etc, eventually you will become more confident and stop focusing so much on the conversation, with enough time and practice conversations will start flowing and you will become less and less anxious. Sorry if this post has become a rambling mess of incoherency, but I have been thinking and applying a lot of these techniques lately and I really think they help.
Although I am still very much under the titanium grip of SA, I think I can atleast hold a reasonably comfortable conversation with most people and I think I am definitely improving thanks to these steps. I'm not exactly sure how I will beat this thing, but these are pretty much my first steps towards ridding myself of anxiety. By 2010 I plan on being a stone cold psychopath who is impervious to all anxiety. I will eat through criticism and anxiety like most people eat cornflakes.
I will kill social anxiety.