Make the Announcement
I know it's tempting to bury your head in the sand and pretend like the whole debacle isn't really happening. It's worth it to fight the urge, however, unless you want everyone to show up at the wedding chapel in their Sunday best and figure it out on their own.
In the case of last-minute cancellations, a willing officiant, relative or bridal party member can make an announcement at the ceremony site. Of course, invited guests who were unable to attend should also be informed (and as soon as possible) to minimize awkward situations down the road.
If the wedding is called off just a few days before the ceremony, gather your nerves (at least temporarily) and start calling guests, especially those who are planning to travel to the event. Don't worry about making 300 calls all by your lonesome, though. If ever there was a job for willing bridesmaids, this is it.
A printed announcement can take some of the edge off of the process if the engagement is called off well in advance of the wedding. You can keep the wording formal and to the point; best of all, you won't have to suffer through uncomfortable small talk or hear everyone's repeated condolences and wishes for your future ad nauseam.