There is a practical point to it, in that it helps concentrate the sound back into yourb head so you can better be in the right key. I suspect it began in the early English trad folk clubs where P.A's were very rare or frowned upon, I suspect as many others here have said many people just copied it parrot fashion thinking they'd look cool. I'm not sure there was ever a need to carry on singing your song with your finger in ear, It is rarely seen now but one does still see it done from time to time