I find that people watch, sometimes a lot, sometimes a little, but they definitely notice. They notice crazy dancers frequently but rarely good ones (a relative term, I know). I also know that I notice what's happening on the floor. It's hard not to watch if you're not dancing or talking. Mostly I pay attention to how other men dance (or don't), how they look, how they move, and how the women dance.
I don't pay much attention to other men, only women. I dance differently with each partner according to the music, what I feel they like, their strengths and weaknesses. Similar to Gssh I take the point of view that the people worth dancing with are the ones looking for things they like, and therefore we do not need to try and impress each other - if I like something about them we'll find each other eventually.
Of course one should develop good fundamentals (balance, control, floorcraft, posture, rhythm) as these automatically make your dance look better or worse regardless of stylistic preferences.