I doubt whether anything written on this thread will cause anyone to change their opinion or practice; all that's likely to happen is that you'll find, whatever your viewpoint, that some will agree and others disagree. Nevertheless, I'll chip in with my own view.
I'm in the "learn a song before you sing it in front of others" camp. To me songs are ephemeral works of art: they only exist as that song, "your" song, for the time you're singing them. Songs, not just your audience, deserve respect as would any work of art you try to create no matter how limited your talent. I wouldn't feel I was showing respect for a song if I didn't give it everything that I had - and not bothering to learn the words would not be giving it everything I have.
As for waiting until the idleness of retirement to find the time to learn the words as one here suggested; I learned most of my repertoire when I was younger and working. Young brains learn more easily. If anyone else out there is thinking of waiting until retirement, I hate to break it to them but, even if you find you have the time then, you'll find the ability to grow new synapses has sadly deteriorated. The most likely result of trying to leave this skill until later is that, when you come to try to learn, you end up saying, "Reading has been good enough for the last 60 years and it's too difficult now that I can't even remember where I put my keys 10 minutes ago."
When I started singing in public in the 1960s no-one I ever saw, paid, unpaid, professional or amateur, read from bits of paper. Over the last couple of decades the practice seems to have crept in and grown until now it's seen as normal practice and it's this "normal practice" that's the problem for me. I think there's a critical mass factor in operation. There's one singaround I used to go to where one person read the words. This was accepted; they'd had a stroke I think and their memory was no longer up to it but none of the other regulars read, they all knew their songs. When people came in as visitors they soon picked up what was acceptable and what wasn't. As far as I know that continues there. The problem seems to be when enough regulars haven't learned the songs and read them instead. Newcomers think this is the way to behave and soon nearly everyone doesn't bother to learn songs but says things like "I haven't sung this one for years but found it just before I came out" or "Here's one that I haven't got round to learning yet but I thought I'd try it out on you." Where's the respect for the song in that? (Incidentally, in reference to the comment "Nobody has yet mentioned the obvious downside of only performing stuff you've memorized. For anyone who isn't being paid to do it, the result is usually a pretty small repertoire which will diminish in volume, accuracy and quality with the passing years." The other singers at the "no sheets of paper singaround" put my repertoire of about 300 songs to shame so my experience is that those who do learn their songs actually have larger working repertoires.)
I went once to the singaround/session that I think revived this thread (via a thread that now seems to have disappeared). Like Mr Miles says, I won't be going again – I'll seek out places where I feel I might fit in better. I'm glad that others go there and presumably enjoy themselves and I'm pleased that people are getting out and singing - I'd rather they do that, even if they read the words, than they sit at home passively absorbing electrically produced sounds - but I'd like to think that there remain enough people around to keep a culture alive that I respect as well; one that believes songs should be learned and respected for the works of art that they could be. As another poster says "If you don't like things done that way, go to a club that suits you. But don't bar those who, for one reason or another, have difficulty recalling lyrics, that is just petty, very petty snobbery." For there to be those "clubs that suit me" there have to be some places that do say "no" to reading from sheets and where like minded people can gather. I don't think any of the "learn the words" group here are trying to ban "paper" clubs, they're just trying to make sure they don't become the only ones.
Quite a few people here keep mentioning performing for an audience but I'll finish by repeating, it's not just about performance for an audience for me, it's also about that attitude to the songs themselves. I very rarely do paid gigs, I've never been a "professional" performer and I'm probably not all that good but I do respect the songs and I will give them everything I can - and that means learning them inside and out.