Start every character with at least one relationship to another character:
The blacksmith is opposing the baron and that's why there is a white rose in his window. The apothecary joined the cult of Orcus and will sell poison. The guard is in love with the girl selling apples at the southern market. The beggar hates One-Eyed Tim for destroying his marriage to Lilly Hill twenty years ago.
I'm trying to phrase these such that they'll offer something to explore like the flower in the window, something to talk about like One-Eyed Tim, a little mission like carrying a message by one of the two lovers while passing through, or a trigger like the attempt of buying poison (or in my campaign, seeking a way to raise the dead and treat the injured).
To evoke a sense of danger, three things are needed:
- a knowledge of danger existing
- an uncertainty that it is an escapable danger
- a certainty that a strongly undesired outcome is possible
So, you need to forshadow the existence of the danger, make it uncertain that they can overcome it successfully, and remind them by the situation that it's possible that they will not be happy with all available outcomes.
In practice, in D&D, things like asking what their current HP are, and then making a quick calculation, and going "Ooh... crunchy!" can up the sense of danger.
Getting the outcome range to include strongly undesired is tricky, tho'. The player needs to have a strong sense of buy-in on their character to actually be overly worried about the loss of the character. I've found that the longer the character generation, the more buy-in is present at start.
For example, a Rolemaster character at level 1 is about equally weak as a Cyclopedia D&D character, and the RM character takes about 30-90 minutes (depending on the player) to roll up, while the Cyclopedia character takes 5-15 minutes. The RM character hurts way more as a fatality in level 1 than the D&D character, and is just as much cannon-fodder.
So, with ways to make it matter more are more choices made in Character Generation (CGen), more significant choices during CGen, more involved CGen, more in-character play, and more personal impact on the character in play. All of these make loss of the character more profound, and thus more undesirable.
Once achieved, reveal the danger as per the other question, and make certain that players realize character loss isn't off the table... and genuine concern, even a true sense of danger, naturally occurs.
Best Answer
Negative Levels don't actually reduce your character level
They basically give you a -1 penalty on a bunch of things for each negative level you have.
Relevant PRD section:
So you don't actually have to recalculate the whole character, you just have to know what things are affected by level drain, and subtract accordingly. You don't lose any spells, or access to feats, or any skill ranks, etc.
So, really all you need to do is apply a penalty of (negative levels X -1) to all attack rolls, saving throws, and skill checks, and reduce hit points! Spell durations also go down and some other things, but that's not too hard to recalculate on the fly.
This is in contrast to older editions of the game when level drain did actually reduce your character level, so Paizo has baked in to the system a less-crunchy way to deal with the classic level drain problem.
Edit:
It has been noted that in previous editions temporary negative levels could become actual character level loss. This has also been removed in Pathfinder (this section is right after the previous quote).