Hello everyone,
I agree with much of the things Wolfgang and Susanne wrote, so I just add a few thoughts. Apart from the oompah-style folkish ("vokstuemlich") music much of the music actually sung by the people are done by choirs, there is no great tradition like the irish sean nos. Seems most of us Germans likes doing things well organized.
Maybe that is why music became so easily corrupted by political parties. Not only by the nazis, but also by the communists. Most bands of the newer folk-scene mentioned above were part of a left-wing movement, what scared of the more conservative as well as the politically indifferent (the bigger part of the population). Also the political correctness of banning perfectly harmless songs just because the nazis sung it did nothing good to the general acceptance of these - otherwise brilliant - musicians (By the way this is not new; the quotation "political song, a nasty song =politisch Lied, ein garstig Lied" goes back to the 19th century).
All the best
Ernest (from Germany - and as you may have noticed, of a slightly conservative opinion)