I've read some theories about this and I thought, those are very clever, but here's a simple one. So, here are my thoughts on how he faked his death.

Remember the 1st Episode of Season 2, the Scandal in Belgravia? There was an event where Irene Adler "The Woman" faked her death, (and yes it was Christmas). Sherlock and Mycroft both checked the corpse, Molly said, "the face was a bit bashed-up so it might be a bit difficult" to confirm if it was the Woman's body, Sherlock opted to check the whole body and confirmed that it was Irene's. That is why Sherlock picked a place where one could get a bashed-up face, the Rooftop, where he can commit suicide and have his face bashed-up. Imitating Irene's trick in faking her death is enough to fool all the characters, (or the whole country, =)).

Now he needed a witness, (or witnesses, whatevs). In the episode "the Reichenbach Fall" on the part where Sherlock stands on the edge of the rooftop, John Watson comes to the building and calls Sherlock. Now, how could Sherlock make his suicide look very real? He just needed the drug in the Episode 2 season 2 the Hounds of Baskerville, remember that the drug was referred to as an Aerosol Dispersant. the drug is found in the fog therefore can be inhaled. In the scene where Sherlock gives his "Last Note" to John, you can clearly tell that Sherlock wants to get John into the spot where the Drug can be released via air, so when John runs to come inside the building, Sherlock instructed John to "Turn around and walk back the way you came", then there was their dialog in the phone, that was to recondition John's mind into thinking that Sherlock would commit suicide, but John really wanted to get inside the building and to get Sherlock but Sherlock insisted and said "No. Stay exactly where you are." Now we can assume that Dr. Watson is now drugged and so Sherlock now "commits his suicide". Then there was a scene when John walks into the Sherlock's "body" and a man riding a bicycle bumped and