In the end, both from the point of view of the singer who, hopefully, is trying to interpret the words and not just repeat them, and the audience, who may not want to listen to his or her neighbour sing the (maybe or not same set of) words in or out of tune, loudly or softly, whatever takes their fancy, it has to be a decision of the performer and no-one else. Otherwise you either have to set ground rules, for which you obtain the individual performer's permission beforehand, or abandon solo singing altogether and adopt what Maple Leaf Boy has just amply described - community singing.
A number of people who have tentatively supported the practice (like Big Mick), have also accompanied their support with descriptions of what can go wrong.
Personally, if I go to a club to hear Gordeanna McCulloch sing ballads, and come away having had to listen to the person sitting next to me singalong with everything she does (whether in a quiet mutter or a full-throated roar, as above), I am left with the feeling of being cheated of a good night out - would any club organiser out there feel they have given me my money's worth?
Wyatt:
"simply because I see you as a defficet to the "folk"
I think you mean deficit - don't you? I'm beginning to be a little bored at being cyber-stalked by somebody who can't spell - please go away.
Jim Carroll