My theory: closing eyes minimises distractions and focusses "processing" on the song. If your eyes are open, that's using up "processing" which would otherwise be going on other things.If the song's a piece of piss (Wild Rover, etc) then singing eyes-open isn't a problem, bcos I don't have to concentrate hardly at all. And if it's a solo singing thing, that takes less concentration so I can keep eyes open. But if I'm playing a complex guitar part and singing at the same time, or if I'm singing harmony (which is hard for me), then I'll often close eyes to concentrate better on the hard bits.
For comparison, imagine doing something requiring immense hand-eye coordination and concentration, like rally driving. Then imagine that someone says, "You have to recite 'The Rime of the Ancient Mariner' at the same time, and it's not acceptable for you to stop talking so you can concentrate on the key thing of what you're actually doing, and no matter how well you've driven, you'll be considered a failure if you can't keep reciting that poem throughout the race."
If you want to "work the audience" with looking round and making eye contact, you'll doubtless be singing songs which are easy. If you're doing something hard (and generally therefore interesting) then you've got more things to worry about than making eye contact. For myself, if someone's playing a beautiful, heartfelt song then I'll often be listening with my eyes closed to better concentrate on the tune, so you're SOL if you want to make eye contact with me anyway!
Graham.