I know a lot of retired or semi-retired people who are very keen on performing. I think many of them dreamed of a career as a professional musician when they were younger, but either their music wasn't the kind that sells or else they had to concentrate on a non-musical career that could provide immediate support for a family. And now they have free time and don't have to worry about money, and they have ten or twenty thousand dollars worth of guitars and PA equipment to justify in some way. And this is their last chance.
The ratio of these aspiring performers to people who want to hear their music is about ten to one, so the audience usually consists mostly of other performers in a system of reciprocal support. A shame, since the music is often truly delightful.
Considering all that, the singaround makes more sense to me. But I never had that dream of being a pro, nor the talent that most of these people have, and people in general usually cling to their dreams in defiance of reality.
Also, there's a thread in contemporary culture that says nothing has any real value if it's not associated with money, so they may feel their music has no value unless they're paid to play it. Even if it's only fifteen dollars, or a free latté and a muffin, at least they're being paid.