There is only one effective method to increase your vocabulary. When your students go through a passage they will obviously come across words whose meaning they do not understand. First ask them to guess the meaning of the word in the context of the sentence. They can then be made to look up the dictionary and get to understand the precise meaning and its application in the sentence. Ensure that they make a sentence with all those words, whose meaning they did not know, after you finish your module. Make sure that you make the necessary corrections and explain it to them. They will never forget the meaning and apllication throughout their life.

Depending on their age, make them read interesting books on subjects which they like. Ask one student to come out with 5 words everyday and share it with the class. Have a rotational system to ensure that the whole class participates and gets fully involved in the process. Depending on the grasping potential of your students, you can decide the periodicity of this activity, as it should not become a burden for them.

There are two common mistakes lot of learners make. The first one is to look up the dictionary and memorize the meanings without trying to understand the part of speech and the application. The English Language is complex because there are so many Homonyms. Depending on the situation or context of the sentence, the appropriate word or synonym has to be used.The second mistake is to understand the root, prefix or suffix. This at best can help you to understand the meaning in a broader sense. These are all superficial methods of learning. 

'There is only one effective method to increase your vocabulary' - girishseshamani

I'm not sure that that is true.  In relation to 'increasing your vocabulary' in general there are many other useful methods, and in relation to 'dealing with vocabulary in reading passages in terms of both comprehension and retention' I think there are a few useful methods too.

There are different options I like to play with, in relation to when, who decides, and how it is focused on, as well as whether there will be checking or practice afterwards.  Here are a few variables I change:

When & Who?

• Before reading. 
  For one of two reasons:  I want to teach some specific vocabulary then reinforce the learning by letting Ss practise using the language receptively by seeing it in a text afterwards; or I specifically want Ss to practise reading skills but I'm worried a few pieces of vocabulary might prevent them from understanding the text well enough to complete the reading tasks (this is what Evergreen is suggesting should be an option, I think).
• After reading.
  For one of three reasons:  I want to teach some specific vocabulary but I want Ss to see it in context first so the focus is on meaning and use first, is contextualised, and Ss are better able to understand the concept; or I want to give Ss the opportunity to decide what language they want to learn, rather than deciding for them (Nik's suggestion); or I specifically want Ss to practise reading skills and I don't want to distract them with vocabulary first, but I think there is some useful vocabulary that might be worth focusing on as a secondary aim after the reading has been effectively practised.

How?

• The teacher teaches it to the class (using various techniques as appropriate - visuals, realia, mini-situations or contexts, drawing on the examples in the texts, definitions, acting & gesture synonyms/antonyms/homonyms, etc...). 
• The students complete student-centred tasks that help them to learn/understand the vocabulary (matching with synonyms/definitions/antonyms/pictures, grouping words under general headings in a table, looking at a definition then finding the word in the text, fill in the gaps, etc)

These two methods are easiest if the teacher chooses the language beforehand.  If the Ss choose the vocabulary, the teacher won't be able to prepare tasks, visuals, or realia as easily (the teacher can predict what Ss might want to learn and have things ready just in case, but the Ss might still choose something that surprises the teacher), and the teacher will have to think on the spot.

• The students completely guess the meaning from context, check in pairs, then tell the teacher.  The teacher confirms when a pair of Ss guessed correctly, and might have to teach if no Ss guessed it.
• The students look the words up in good learner dictionaries.
• The students guess the meaning from context, check in pairs, then check with a bi-lingual dictionary to see if the bi-lingual dictionary gives the same meaning that they predicted.

Checking & Practice

• The T asks the Ss questions (accompanied with pictures or gestures, etc) afterwards to check to see if they really understand the vocabulary.
• The Ss turn over their books and the teacher elicits the vocabulary (if after reading, the teacher elicits the whole clause it is in) and models and drills pronunciation.
• The T asks Ss to produce example sentences (half-checking understanding and half-practising using it).
• The T asks Ss to make mini-dialogues or short stories using some of the vocabulary (as above but with more context).
• The T has other practise tasks (role-plays, discussion Qs about the reading, writing a letter, etc)

What I do is decide on the lesson aims first (Reading focus?  Vocabulary focus?  Mostly reading with a bit of vocabulary focus?  Half and half?), then I choose one technique from each category based on those aims - one 'when/who', one 'how' and one 'checking/practice' and combine them.

I find it's a fairly useful approach, and the more I do it the more extra ideas I come up with in each category.  The only thing I don't think is useful at all is stopping to focus on vocabulary during the reading - it has to be before or after.

If possible, I would like to shift the discussion slightly towards the topic of the infamous 'mental lexicon.'

Here, I'm not trying to suggest an activity even though I highly appreciate your ideas, I'd rather start with a conceptual question in order to understand the possible impact of your suggestions.

In the context of teaching grammar and vocabulary at the University of Hanover, there has recently been a discussion of Dieter Wolff's ideas on the role of the mental lexicon in second language learning and teaching.

Wolff refers to a former definition of the mental lexicon (Raupach in 1992) and stresses the difference between working on the learner's so-called speech reception or, with respect to the understanding of language, the mere perception, and the learner's ability to produce language. 

This differentiation may remind some of the alternative, however, perhaps more popular concept of an active vs. passive vocabulary.

Do you think Wolff's ideas are actually related to the simple differentiation of two sorts of 'vocabularies' as part of a mental lexicon? If they are, meaning the differentiation can indeed be taken for granted in the process of a guided development of communication competences, what would this imply for teaching vocabulary?

Would it also make sense to differentiate between teaching active vocabulary, or teaching speech production for that matter, and teaching passive vocabulary?

Do you think a constant awareness of such a divergence may also change an L2 teacher's methodology?

When I understand the comment by fellow ESL discussion member Heath correctly, we may agree on a vague difference between both concepts, however, a response to such a distinction, whether it truly exists or not, cannot be made by teachers of English as a foreign or second language, or any foreign language, for that matter.

The shades of grey would just not allow the teacher to decide on which part of the lexis his teaching activities are targeted at, since he or she may not even know where receptive vocabulary ends and where productive vocabulary starts, if there is such a distinction at all.

I most certainly agree with Heath's statement that it is rather awkward to talk about two distinct groups or sets of vocab, although I also tend to see some truth in Wolff's concept of the mental lexicon. More precisely, I think, judging from own experiences and empirical studies of the mid-nineties, there has to be some order in the process of vocabulary acquisition.

I am not trying to argue what it takes to say you 'know' a word entirely here. I ask you, in this context, if we can agree on the following acquisition order. The idea is that vocabulary learning starts with understanding vocabulary items which are previously unknown and, once these items can be recognized via receptive skills, they subsequently can be used productively. Those vocabulary items become part of productive speech.

While a distinction like the one proposed by Raupach or in the concept of active vs. passive lexis possibly appears to be harsh, it might as well be too ambitious to teach all possible meanings of a vocabulary items at once, and make them instantly accessible for the student's receptive and productive skills or any comparable distinction.

Be assured, I'm not trying to go too far in a behavioristic direction like, for instance, Lashley (1951) but I like the idea of sequentiality in learning. I'm rather referring to the suggestions Giles and Sun (2001) made although I'm perfectly aware of the fact that learning does not equal learning, especially when we talk about language learning or, with Krashen's words, language acquisition.

In order to reflect on the discussion's current state it makes sense to return to its opening, as user JDStar suggested. When there is indeed a sequentiality of comprehension, retention and, later, production how do we as teachers react on this issue? Notice, I'm not asking for further ideas for methodology, as many of you did that already, and quite well, I might add. I'm wondering if we continue to work on a certain vocabulary item differently once we believe it is comprehended, again, differently, when we assume the student has truly memorized it and so on. Or do you think our vocabulary teaching is stressed on mere comprehension while we take the further development for granted? Of course, this is not the case but to what extent can we monitor this development?

I would highly appreciate your thoughts on this complicated issue.