Sparring is one of the key components to becoming a better fighter, hands down.  You can hit the bag as much as you want, work on focus mitts, or shadow box, but they can do so much.  Your perception starts to change once you enter the ring.  Do not get me wrong.  Working on the bag, conditioning, etc. will help you vastly get better at technique, accuracy, power, and speed, but you need to apply them.  Instead of just jumping into the ring and get knocked around by a seasoned fighter, it is good to break it down so that you can achieve the confidence when you get to the level of full on sparring.
Breaking It Down
We are going to break down the sparring drills into bit sized pieces.  Partner up with someone roughly the same size and skill level to start out.  Focus on a certain technique or combination of techniques, such as, jab, cross, and hook.  Square up with your partner in your fighting stance and take turns executing your techniques, while the other is blocking.
The benefits you get from this are three-fold.  One, you are learning how to punch an actual person.  Two, you learn how to block the combination you are training with.  Three, you are learning that the combination may not always work against a block.  With this dilemma, you learn strategy; setting up and faking your opponent.  You will learn how T.A.P.S. (technique, accuracy / aim, power, and speed) apply to each exercise.
Once you are comfortable with the jab-cross-hook combinations, try and start working on leg kicks.
Conclusion
Sparring takes confidence, because no one likes to get hit when they first start training.  But the more practice you get, and the better you become, this confidence starts to come naturally.  Eventually, you get to a point in your training that you do not care if you get hit or not.  It is part of the package deal.  Train hard so that you can fight easy.