One of my favorite definitions comes from the introduction to "English and Scottish Popular Ballads; the Student's Cambridge Edition". George Kittredge writes: "The popular ballads...belong to the folk." He goes on to describe a community celebration, where a group of people is gathered for some common purpose. "The object of the meeting is known to all; the deeds which are to be sung, the dance which is to accompany and illustrate the singing, are likewise familiar to everyone....There is unity of feeling and a common stock, however slender, of ideas and traditions. The dancing and singing, in which all share, are so closely related as to be practically complimentary parts of a single festal act. Here, now, we have the 'folk' of our discussion...a dancing, singing throng subjected as a unit to a mental and emotional stimulus which is not only favorable to the production of poetry, but is almost certain to result in such production."
I find our on-line folk communities, like our real-time ones, to have these things in common: a unity of feeling; a common stock of ideas and traditions; and a desire to create poetry and music when gathered together. That music then becomes available to all who share the creation or who just listen and take it home in their hearts. Want an example? Look at the on-line song/poem creations that happen on these web pages.
We are the "folk" of folk music. And the music that belongs to us, that we share with each other and the rest of the community, that music is folk music.