I've received many an email asking about garters and prom. Well, I recently spoke to very helpful girl, Annie, over email regarding garters. Sometimes they come with the tux rental. A lot of people get them to match their dress. At the end of the night the girl gives their date the garter, and the girl gets his bow tie.
Some guys hang the garter in their rear view mirror of their car.
So there you go. Personally, I think garters are a tradition best reserved for weddings, but it all depends what the norm is at your school and prom.