Everybody here has great advice, but what about getting the shot once they do see you? Is all lost? No, there are a plenty of things to still get the shot. This is where photographer personallity comes into play.
If you are ready to shoot and people stop and pose, sometimes it is as easy as saying, "Oh just keep on doing what you were doing.". Of course this is easier when you are not using a flash. Flash photography grabs a lot of attention and can be distracting.
You can always tell them, "Oh, keep going, I was shooting something behind you.".
But the best trick has been hiding up our sleves with the new "Live View" trend. At first, I thought live view was great just for portraits (mostly to ensure the best focus). But then I learned its' real secret, candids!
People are so used to someone holding the camera and viewing it's LCD, they usually don't give it a second thought. Even when in the hands of a professional.
Even better is Live View with silent shooting. In this case I am looking as though I'm reviewing shoots when really I'm composing my next one!
Of course I have no disagreements with posts above. While I'm not a big fan of shooting from the hip (I like to shoot wide open a lot) it's still worth a try.
Good luck and always try to anticipate the action before it happens.
-Nick