The dollar dance (or money dance as it's sometimes called) is a tradition that originated in Poland. The newlyweds would dance and guests would pin dollars to their clothes while they dance. This tradition has changed quite a bit over the years and now guests can give their dollars to the best man or maid of honor (to collect for the couple) as they get a chance to dance with either the bride or groom for 20-30 seconds.
So, why is the “dollar dance” sometimes considered to be tacky? In cultures where the tradition isn’t a normal wedding reception practice, it can be viewed as a public way of requesting a cash gift. After family and friends have already spent money on wedding gifts, shower gifts, and possible travel costs, some find the dollar dance to be in bad taste – even if it is optional. On the contrary, in some communities the tradition is not only accepted, but it’s also encouraged. Like the majority of social customs or cultural practices, what might seem tacky to one group of people may be incredibly significant to another. (excerpt from Southern Living)
In my experience, the dollar dance is often viewed by guests as a good time to leave for the night. In some cases, the dollar dance can last up to 15 minutes if the lines are long and guests are over-staying their 20-30 second dance time allotment. Playing slow songs for this long can result in a lull for the reception and is often viewed as "the reception is winding down".
Many couples only insist on the dollar dance because they feel they will get rich from a few dances. The fact is, most couples will only give $1 for the dance and even if grandma or grandpa give you $20, the most you'll end up with is about $150-175. Is that enough to risk ending your reception early? Most couples don't want to chance this as they've spent thousands on their special day and would hate to see it end prematurely.
The dollar dance will most likely, never fade away completely, but it is far less common today than it was 15 years ago. Whether a couple decides to do it or not is completely up to them. After all, it's their day and The DJ Guy will make it happen they way they want!