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.
In the 1960s, folk music blended with mainstream music, as the Baby Boomers came of age all at once. 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. Now, in the 21st century, 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.
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.