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human
[Back to the Future] Why does Earth Angel get a positive reaction?

During the Enchantment Under the Sea Dance, Marty subs on guitar since Marvin sliced his hand open earlier getting Marty out of the trunk. Marty starts off decently, but as soon he starts to be erased from existence he starts messing up and then stops playing altogether for the majority of the song. The band notices, Marvin gives him a look and the piano player even asks if he's alright. 

Of course once George kisses Lorraine and secures Marty's existence, Marty gets back up and closes out the last few bars of the song. But regardless - the performance was missing the guitar almost entirely! Yet the crowd and the band all show their approval to Marty, thinking it's such a good performance that Marty should join them for an encore!

Did anyone actually listen to how Marty just butchered the song??

The only explanation I can think of for why the band thinks it's a good performance is cause they are all stoned out their minds on the reefer. 

As for the crowd... Maybe they all somehow magically hear Alan Silvestri's orchestra accompaniment (which is clearly score, not source). This is backed up in Part II when we revisit the dance and the newer Marty witnesses George and Lorraine kiss - we again hear the Alan Silvestri orchestra even though they are nowhere to be found.

Maybe everyone was on the reefer that night...
gpt
The band was just keeping up appearances for the sake of the show. 

As for the crowd, years of experience as a performer tell me that crowds don't notice shit. This is especially true if they're a lot more worried about dancing or smooching than listening to the band. They might have a vague notion that something sounds off, but that's it. 

If you think you've caught every mistake at every concert you've attended, I've got a bridge to sell you.