How do you lose at Christmas crackers?

A bomb with a toy inside?!

If there's explosives involved, I'm surprised Americans don't do it.

We do have something similar, but the way I've seen it done is just individually (not with two people). I've seen pretty much exactly what Iceglow described, including the joke and paper crown (though some have instead had cheap plastic toy instead of a crown).

Appears the powder used is not as I first assumed a tiny amount of gunpower unless it is contained in the same chemicals found in cap gun strips. According to wikipedia the cracker strip is two pieces of card with that on it at the middle and then a sealed together with a paper tape so that they will pull apart but doing so will involve the friction causing the "crack" sound effect lol.

wiki on christmas crackers.

Note: it say's they're called Bon Bons sometimes, I've never heard anyone call them that so that must be a commonwealth thing.