I think it ultimately has a lot to do with technique - in the broadest sense of the word. The following is a purely personal anecdote, but others may have had similar experiences.
About a year ago, I played a couple of pieces in front of a friendly audience of other guitar players. I wasn't at all nervous and was looking forward to playing. However, as soon as I was ready to start, my right hand started shaking, to the extent that I wasn't sure which strings I was going to hit. I managed to get through them, but with a fair few mistakes and missed notes. It put me off for some time.
Recently, however, I played again in front of a similar group; again, no nerves - and this time no shakes, and virtually no blemishes. It was an altogether much more pleasant experience. So what was the difference - I'm no better player now than I was then.
Well, the first time, the pieces were technically quite challenging for me and although I could get through them OK at home, I had to concentrate hard on getting them right. The second time the pieces were well within my technique and all my practice time was spent on interpretation of the music. The result was that the second time I was concentrating on the interpretation of the pieces, and not just on playing the notes i.e. my technique was secure for these pieces. So I think that perhaps, metaphorically speaking, if you're not totally prepared, your subconcious lets you know it, regardless of how nervous, or not, you actually feel.
Few of us aspire to Wigmore Hall as alluded to by Mr Fretwork, but I would imagine even a relative novice would have no problem sitting on the stage there in front of an audience and playing a single note. So how about two notes, or three... - at what point will your subconcious tell you 'you're not up to this' and the shakes begin?
Lester Backshall, Guitar Maker - Aylesbury UK