We combined ours, but at other weddings I have been to, who ever is not dancing with their parent usually watched from the sidelines, and often stood with their parents.
Since DH has a Mom and Stepmom, while I danced with my Dad, he danced with Mom. The he danced with Stepmom while I danced with his Dad. Everyone else ate their cake, which we cut right before dancing. We did our bites with eachother, then ate our pieces while they cut for everyone else. Then while they ate we danced.
typically the other just sits/stands & watches during the others parent dance. some couples choose to combine their father daughter & mother son dance & others include other fathers daughters & mothers sons in their dances.
we will each have our own parent dance, me with my dad & my fi with his mom & the other will just watch with everyone else during the dance.