One thing to keep in mind about bluegrass music is that it was designed from the beginning to be commercial counrty music. I wasn't really meant to be back porch music. When country music fans first heard Bill Monroe and the Blue Grass Boys over WSM's Grand Ole Opry with Earl, Cedric, Chubby and Lester, they went generally bonkers. Suddenly the Gibson Co. was back in the banjo business and, I think, had to dig out their patterns for five-string banjos. People hadn't wanted many of them for a long time.
Note that Monroe didn't originally refer to his music as "bluegrass." Other people eventually gave it than name because Bill had named his band The Blue Grass Boys after his home state. Bill has been quoted many times as saying he was just playing country music and trying to get a sound that was unique and easily identifiable. I believe he actually experimented with electric instruments, piano and accordian at different times before settling on the 1945 configuration.
The reason bluegrass jams may seem strange to many players unfamiliar with the idiom is that it is really intended as commercial entertainment. It tends to be highly arranged and often, several arrangements of a tune must be committed to memory before a player joining a jam will know when to play lead, when to play backup and when to just lay out.
Downeast Bob was correct in saying bluegrass grew pretty steadily in popularity since it's inception. The advent of R&R made it hard on most country musicians and I've read that in 1963, when Brad (AKA Bill) Kieth was a Blue Grass Boy, they would all climb into a station wagon with the bass tied up on top and drive from Nashville to California for a one night stand. Now that's dedication.
Bluegrass started to really grow in popularity when Carlton Haneys (sp?) produced the very first bluegrass festival at Watermellon Park near Berryville, Virginia. It seems to me the year was 1965. This event was so successful, it was only a short time before Monroe and others began producing their own festivals. And what festivals they were. Jan and I happened to be in southern Indiana not long ago and stopped by the Bluegrass Hall of Fame in Bean Blossom. As I looked around the room I realized that, with the exception of Carter Stanley who died before the festivals took off, every single current hall of Fame member would be booked on the same show at the same festival. You'd pull up to a festival site and there along the front fence would be a long row of giant tour busses facing the road with names like Ralph Stanley, Jim and Jesse, The Country Gentlemen, Flatt & Scruggs, Jimmy Martin... every big name in bluegrass would be there. What's more, they were nice people. Many of them would perform all day and then stay up all night just to jam with the fans.
Sorry to go on and on. I didn't realize when I began this post what a grip those memories still have on me. All I can say is, you shoulda been there.