Prolonged exposure to high-decibel sounds can damage the inner ear in a number of ways, causing hearing loss. Higher frequencies are less detectable, so they're the first to go. For more info, see the link below.
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Beethoven
So they can hear themselves sing and play, which is almost impossible to hear due to the crowd noise and the unique amplified and mixed sound that is being heard by the audience. Often due to behind the scenes mixers, a performer can get confused by what they are doing in comparison to the behind the scenes mix that is bring produced for the audience. Simply put, they hear thru their earpiece the raw music they themselves are producing before electronics gets hold of it.
Yes, they wear them ... singers and instrumentalists in a band need to hear the other members so that keep the same tempo and thus be able to blend their voices with the others. Over the powerful amps and crowds they couldn't hear themselves singing without these aids.
A sound that characters in the scene might hear, such as the voices of people that we see, or the sound of music when we see the musicians (or reasonably expect that they are in the scene) like the music playing at a club.A voice that comes from an unseen source, like a narration or musical underscore, is non-diegetic sound.
Sting. Set them Free (if you love somebody)