I remember talking to a friend who works as a keyboard player for One Night of Queen the Tribute concert that tours the world. Gary the lead singer who plays the part of Freddie really well hates an audience that does not get on there feet and join in. Here in the UK you will always find that it is the normal thing to do. But yes don't go screaming the words at the top of your voice that is very rude.
An artist likes to get the audience to join in and at times will allow the audience to sing some lines on their own. It is a great way to connect with them. If the audience don't sing along then the artist will think you are really a fan and in Gary's case he has been known to threaten to walk off stage and end the gig early.
P.S I'm an acoustic guitarist myself and I would like Gary be offended if no one was singing along if I was in a band.