Any Ideas on advertising a martial arts school?

What about holding a class in a park when it warms up? It gets the students outside and the people walking be interested in what is going on. You could have someone who isn't teaching around to answer questions, hand out flyers and keep people away from the lesson. This would probably work best with an older group.

If you teach little kids get some tee shirts made up. You could give them to all students or use them as a reward. Kids love getting stuff like that and will wear them around town.

What about offering a special where you give your students a coupon that they can give to someone to come in for a free lesson?

Create some fliers or something and distribute them to surrounding businesses. You can also hire people to place them on doors in surrounding neighborhoods or on cars in nearby parking lots for relatively cheap. Maybe you can offer some kind of free mini-lesson to increase interest. Just a few suggestions.