'Participate' might be too strong a term... If you're thinking they stop the parade and have kids come out and dance & play - then no, not usually. From our experience, characters on floats will wave at individual children and talk to them, and ambulatory characters will walk up to kids and interact more fully. For example, Snow White (on a float) heard my daughter say "Hi, Snow White" and responded with a very demure "How sweet", and the Toy Story army men will come up to kids, stick tongues out, salute, etc. For some reason my kids seem to be Pluto magnets.