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Make sure you have level 50 in illusion so you can cast invisbillity spells.
Make one in the arcane university where you can cast it on other people (You must have a horse for this to work!)
Cast the spell on your horse and get on your horse.
Notice that you and your horse are invisible? Get off your horse before the spell runs out and you should still be invisible.
Take off all of your armor apart from your helmet and you should look like you're headless.
You can do this with any other body part, for example you can run around as a pair of legs. [more cheats for The Elder Scrolls IV: Oblivion here]
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