Would we be out-dressing the host?

I think you'll be totally fine ... if the event is being held in a hotel ballroom, and the invitation specifically lists formalwear as an option, you have no reason at all to feel uncomfortable or uncertain about the lovely classic dress you intend to wear. It's perfect!

So as to be sure that your friend knows you'll be dressing up, I would subtly mention it. Just thank her for the invitation and tell her you're so excited about going and you've picked our your dress, you'll be wearing your long black formal dress (etc), so she'll know and she won't be taken aback on the night. I'm pretty sure she'll go all out and dress to the nines for her own masquerade party anyway though. I don't think you have anything to worry about, but it was very thoughtful of you to consider it.

Wear the dress but make sure that you do not wear too much jewelry with it and don't do your hair in a fancy way. If you have long hair I would suggest loosely curling it and keeping it down. Also don't overdue the make-up. The point is you want to look good, but not absolutely stunning. This is your friends day and hopefully she will show up looking stunning. If she does not show up all decked out then I wouldn't feel bad if you look better than her. Think of it like being part of a wedding; you want to look good because everyone will see you and you will be in the pictures, but you don't want to look as decked out as the bride. If she is a really good friend of yours maybe you should call and ask what she plans to wear? Or let her know what you want to wear and ask if that will be okay or if it is too formal. But in all honesty I would just do what I said above and go and have a good time.

It is better to overdress then to under dress. I think with a formal, semi-formal code this would be fine. If you are in doubt, contact the organizers of the party or see what some of the other people are wearing and follow their examples.

Chances are the hostess will be dressed to not only impress but to totally blow away her guests. My advice: Go all out! Hair, dress, accessorize your hearts out, fancy mask (it is a Masquerade Ball after all) If for some reason you do manage to "out dress" the guest of honor then it's on her for not going as Big as the invitation suggests.

You would look marvelous, and classy. If the invitation left it open regarding what to wear, do what you want, it is a party not a competition. No feelings need be hurt.

It is a masquerade party. Wear what you want. How would you possibly know what the hostess will be wearing.

if people werent used to wearing sweats and pajamas at formal events they wouldnt have that problem!if you out dress them,shame on them,not you