These are just a few things I've learned from reading countless articles on the subject.
1. Think about it - unless your bio is being read by a fan, it's going to be your introduction. The folks you're targeting will most likely read before they listen. Our bios have the opportunity to give potential fans and decision-makers a glimpse into that part of us from whence the music comes. And make the first connection.
2. Of course, you don't want to fabricate, mislead, or "pull anyone's leg" but you're not writing a shopping list, or your account of a traffic accident. Every life has a story, and every bio is a life - in about 500 words. You have time to create a narrative and connect a few of the dots that either shaped you into or reflect the artist that you are.
3. You also have time to stick some quotes in there - preferably cool ones. You'll usually want to do this in the opening paragraph, although - if you're creative enough - you can find ways to work one or two in later as well. This comes in especially handy if you don't really have any usable "press" quotes, and are just making do with what your buddies scrawled on napkins in exchange for beer.
4. If you have a friend who'd be willing to write basically a theme paper about you, you should consider it. No matter how well you're able to put words together, there's really something to be said for having a more objective perspective.
5. There's a fine line between humility and egomania. You'll want to tread a little closer to the latter, and if you're truly a humble person, it can be tough. To me, that's always been the greatest challenge, and I'm borderline narcissistic (with an inferiority complex - at least that's what my last girlfriend said). But you can't be afraid to toot your own horn, to see your uniqueness and creativity as causes worth celebrating and your story as one worth telling.