The Dancing Fiend trophy consists of 4 sub-challenges:
Dance of the Dead: Dance after becoming a ghost.
To get a playable ghost, I would suggest using the Ghostify karma power on one of your Sims. As this Sim, click on a stereo and choose to dance.
Dancing with Death: Dance with the reaper.
See Don't Fear the Reaper for how to interact with the Grim Reaper. Using an Evil, Insane, and Daredevil Sim, invite Grim to dance. While you are both dancing, click on Grim again and choose Dance Together. NOTE: I only had the dance together option available when using an Evil Sim.
Do the Robot: Make a simbot dance!
See No Fate But What We Make for how to create a Simbot. After creating a Simbot, using that Simbot click on any stereo and choose to dance.
Move Your Body: Become an expert dancer - practice, practice, practice!
As any Sim, go to a stereo and choose to dance alone. Leave your Sim dancing for long enough and after a few Sim hours, this challenge will unlock.