Since the whole blogosphere is talking about how to be a better GM I am going to toss in my two cents in the ring as well. I guess mine have the queen on them, since I have no idea how the euro cents look like.
I suggest there is just one skill you really need to be a good GM.
Well, you probably think that is hogwash, and more than one thing is included in my suggestion. I still want to focus on that thing, though.
To be a really good GM, you need to be able to go with the flow.
That's it. Say 'yes' and make some shit up. That's what it's all about.
What? You think that didn't help much? Let me expand a bit then.
I suggest that the great thing that hanging out with your friends pretending to be an elf is all about entering a secondary world where you can do anything! In order to have it be like that, for the players it must always feel like the limitations of their mundane existence are no more.
That means that if they sit there and want you to take them through a story, make some shit up and do it. Lead them through fairyland. If it means they have glorious plans for how they will hexcrawl and explore the sandbox, make some shit up and do it. Show them fairyland and let them rape it (yes, they will do disgusting things against your wishes. I didn't type that lightly).
I never said it would be easy, or that I could teach you how.