The passage is a highly collected trot (though not as collected as the piaffe where there is essentially no forward movement) where the pony will appear both light and powerful.
The passage appears quite similar to the piaffe. Conceptually one can think of the passage as a slow motion (and elevated) trot, and the piaffe as a slow motion passage. They key to performing the passage in ponyplay is maintaining the even rhythm of the trot. Thus, the elevation must be introduced gradually. You will want to keep all the energy of a standard working trot, but translate the forward energy into up and down motion of the pony's legs.
Start your pony off with a working trot. Once the pony is moving forward with adequate energy ask for collection by applying rein pressure. You want the pony's forward motion to decrease, but you do not wish to lose the total energy. Thus, you may have to use your leg or crop to let your pony know that you are not simply asking to slow down. The pony should instead start stepping higher. As you ask for more and more collection, your pony should be stepping higher and higher. If your pony is simply slowing down, use your leg or crop while still maintaining the increased rein contact.
Begin slowly...gradually introduce your pony to collection. Keep in mind that maintaining a collected gait can be quite difficult for your pony and is actually quite exerting. The passage is a very collected gait, and to maintain it for any length of time can be a challenge even for the most fit of ponies.