It's all about developing a personal relationship to the songs you're singing, the tunes you're playing or a better understanding of the dances you're playing for. Martin Carthy has commented somewhere to the effect that, whilst he's singing there's a film of the ballad/story running in his head and he's in there in the story. I don't have a film but I also don't sing a song in public as soon as I've learnt it. A song needs a few months to 'bed-in' or mature and become a part of you before you let it loose on an unsuspecting audience.
I sing at a monthly acoustic music club in Germany where most people have crib-sheets of one sort or another with them. On the one hand this irritates me, but on the other I think OK, they're trying to sing in english, a foreign language for them and perhaps they don't trust their linguistic abilities that much. That being said, I also suspect that some of them only decide what they're going to sing a day or so beforehand and they've got their work cut out dealing with the guitar accompaniment (they mostly sing pop/rock songs). What I do notice is that, for me,(and this is irrespective of the language being sung) because they've not really got into what they're singing it all tends to comes over as 'flat' or lifeless.