The only ‘realistic’ way of carrying out a full scale evacuation of an aircraft would be to put people in it and set it on fire. That said, FAA takes some efforts to keep the evacuation tests as realistic as possible without seriously endangering the safety of the 'passengers'. The FAA Advisory Circular 25.803-1A - Emergency Evacuation Demonstrations lays out some rules regarding this.
Only half the exits are used for evacuation by a representative mix of passengers, with some debris (luggage, pillows etc) strewn in the path.
The aircraft is to have the maximum number of passengers and flight crew, with a representative mix of age and genders with dolls for children.
Not training any of the participants in the test, i.e. both the flight crew and the participants are not trained to evacuate the (that particular) aircraft. According to the Advisory Circular,
The flight attendants should not be trained for specific demonstration conditions, except that specific training should be given which relates to the safety of the participants prior to and during the demonstration.
The participants are clearly told what they are going to do.
The prospective participants should be informed of the purpose of the demonstration and the expected duration of their participation.
Though the participants know 'why' they are there, they are not supposed to know 'when' demonstration is going to start.
Neither the crew nor passengers should hear or otherwise receive any indication that the demonstration is about to begin. The first indication to participants should be the extinguishing of the normal cabin lighting.
The participants should not know about the evacuation plan beforehand.
If safety devices or any other equipment external to the airplane could indicate to the test participants which exits are to be used in the demonstration, passengers and crew should enter the airplane through a tunnel or other means that will prevent them from seeing that indication.
The participants are more than likely paid (employees with previous knowledge of the system are not allowed), though there is no mention of any 'prize' for first getting out. The regulations simply state,
Prospective participants should be informed of any direct benefits to them (e.g., pay, meals, etc.) and of benefits to society
The participants are prevented from interacting with outside and to recieve any information from outside the aircraft.
...exterior windows should be obscured from the outside to prevent both viewing of the outside conditions and any ground lighting from shining into the airplane.
There is intense debate over how 'realistic' the evacuation tests are. For example, the evacuation of British Airtours Flight 28M, a Boeing 737 took more than 5 minutes (resulting in the deaths of more than 50 people), though the aircraft had passed the test.
According to Aircraft Evacuation Testing: Research and Technology Issues, there are multiple problems with this type of testing:
- There is only one data point (Full scale evacuation tests are costly; each one costs nearly $1m)
- The conditions do not reflect the actual ones experienced (for example, fire, smoke etc.)
- The participants know why they are there (Employees of the manufacturer are not barred, though they may not sit near the exits).
- The participants do not reflect the actual demographics of the flying public, and if considered, increased the evacuation time significantly (obviously, disabled people and kids are not there in demonstration).
- The participants do not experience any trauma. Of course adding smoke or fire is not an option as already around 4-5 percent people are getting hurt.

Image from Aircraft Evacuation Testing: Research and Technology Issues
September 1993 OTA-BP-SET-121 NTIS order #PB94-107620
As a result of the aforementioned BA28M accident, UK's, Cranfield Institute of Technology (CIT) carried out a number of tests which included a case where financial incentives were offered to foster competitive behavior among
test participants. The study determined that,
the presence of a competitive element had a significant impact on egress
rates for evacuations through the bulkheads, but did not affect the rate of evacuation through the Type III exit
Note: According to FAA, This type is a rectangular opening of not less than 20 inches wide by 36 inches high, with corner radii not greater than one-third the width of the exit, and with a step-up inside the airplane of not more than 20 inches. If the exit is located over the wing, the step-down outside the airplane may not exceed 27 inches.
The US Department of Transportation also carried out studies, which resulted in similar conclusions.

Image from Aircraft Evacuations Onto Escape Slides and Platforms I: Effects of Passenger Motivation, DOT/FAAAM-96/18
The study found that the introduction of smoke did not have much effect, but noted,
Although this research design biased against revealing any deleterious effects of smoke on egress, previous studies using smoke had shown robust reductions in egress speed.
Giving monetary incentives to participants reduced the time required for egress.

Image from Aircraft Evacuations Onto Escape Slides and Platforms I: Effects of Passenger Motivation, DOT/FAAAM-96/18
In this study, the 'competitive' group were offered a financial bonus of $50 to be among the first 25% passengers to evacuate the arcraft. However, the passengers in the competitve trials
...(became) more aggressive and climbing over seats, outmaneuvering other passengers, etc. to get out quickly.
resulting in broken over seat backs, among others. I suspect participant safety is the main reason FAA doesn't offer any incentives duing demonstration.
Because of these reasons, simulations are being increasingly used in modelling evacuations which include variables like crowd behavior, state (of the person), mobility, etc.