Entertainment is the whole point of having a graduation party! For dancing, a live band or disc jockey will get the fun started, and keep it going. Rule of thumb: a live band generates the most excitement and drama, and will be more of a change of pace for guests and honorees. On the other hand, a disc jockey can play a wider variety of music, and costs less.
For extra excitement, novelty entertainers can interact with guests and bring a real festival atmosphere to the party.
Light, mellow background music--played by a jazz combo, classical group or soloist--creates an enjoyable atmosphere for graduation celebrations where people may not want to dance. This option is especially useful for honoring more mature graduates who would prefer a more sophisticated event.