To dance with a Princess interact with them
and then dance with
Princess locations:
Aurora - Next to the gift shop in Fantasyland just past the castle
Ariel - In front of It's a Small World in Fantasyland
Cinderella - To left of the carousel in Fantasyland if approaching from castle
Tiana - In New Orleans Square
Belle - In front of the Princess Faire attraction in Fantasyland (opposite Ariel)
Jasmine - You must complete some tasks for Aladdin and Genie in Adventureland before she appears. She will appear next to Aladdin.
Snow White - To the right of the Castle next to the Wishing well
EDIT: You need to be lvl 5 to finish the questline to unlock Jasmine