Any style of music which represents a community and can be sung/played by people who may or may not actually be trained musicians, using the instruments available to them.
As times have changed, folk music has changed to reflect the times. Many of the old labor and protest songs are still sung today, albeit with new verses that were added to reflect the context in which the songs were resurrected.
Traditionally sung and played within communities - i.e. not made for popular consumption - American folk music became embedded in the mainstream tradition, creating some combination of folk and pop music, during the mid-20th Century "folk music revival". Thanks to radio and recorded music, artists and fans in New York could develop an interest in the music indigenous to the Gulf states. Folks in Seattle could discover the fiddle tunes and dance numbers from the folk music tradition of lower Appalachia.
Thus, traditional American folk music started to blend with mainstream recorded pop music, as the Baby Boomers came of age all at once, many of them listening to Harry Smith's Anthology of American Folk Music. The music of the folk revival was narrative pop music with a social conscience. Since then, community-driven musical forms (punk rock, hip-hop) have evolved from this combination of folk and pop music. Now, in the 21st century, American folk music has strong influences from all of these musical movements.
Outside of musicology, "folk music" is more frequently used to describe a style of music that has evolved rapidly over the last century. You'll hear critics and fans alike referring to an artist as "folky," and generally that doesn't mean they’re borrowing a melody from a traditional source. Instead, that term is given to songs that are played using instruments not typically seen in a rock or pop band. Whether or not the song they've written on their acoustic instrument will survive across generations until it's so commonplace, it's found its way into the "folk vernacular", doesn't seem to matter with many modern critics and fans. Whether or not this dilutes the tradition of folk music is a frequent debate among critics, musicologists and fans alike.
For the purposes of this site, "folk music" refers to music derived from or influenced by traditional American music, whether it's a contemporary mainstream band putting to use the clawhammer banjo style, or whether it's a throwback troupe playing jugband songs in exactly the same way as they were originally intended. Music which keeps the folk tradition in mind, is constantly building on that tradition and keeping it alive. As long as that music is made primarily for the sake of giving voice to a particular community - rather than exploited for profit - (regardless of whether or not the artist is making good money doing so) the reporter running this site believes it is contributing to the ongoing tradition of American folk music.
Since folk music is most adequately defined by the people who make it, it's important not to ignore that qualifiers like "folksinger" or "folky" have come to mean something different than they did 50 years ago. Folk artists today are experimentalists who dabble in different genres, integrating various musical influences into their narrative songs.