Singers use the finger-in-the-ear in most genres, in order to better hear themselves, when they're singing harmony, or with a loud band. Nothing wrong with that - all tried and tested etc.
But there is a certain type of folkie (not spotted so often these days, but you see them from time to time) who do the finger in the ear thing when singing solo, unaccompanied and in a room of twenty or so other people (or fewer) who are all sitting in a respectful silence.
If someone can't hear themselves under those circumstances, they're probably singing a bit too quietly.
I think in this case, it's pretty obviously an affectation, possibly copied from Ewan McColl, who had several affectations, but was sufficiently authoritative, or influential for them to have been seen as 'the way to do things'.
It was more widespread in the 60s, as was the Arran sweater, and this has passed into cliche. I think the practice has largely died out, but somewhat tediously, the stereotype persists. To this day, any mainstream paper/magazine that mentions folk music will invariably mention something about 'finger-in-the-ear' in the opening paragraph.