As a struggling musician you want to make money applying your trade. I know some are more bent toward the artistic side and see getting paid for "art" as a detractor and as detrimental to the artistic process. Hogwash. Any service, including art, has a value attached to it. To infer that putting a price on some work of art is somehow insulting to the artist would be attributing a character to money that simply does not exist. If you are providing a service that is adding value to someone, then money is simply a trade for the service. Simple as that. Now the question is: Is playing for tips a respected way to apply your musical trade?
Let me answer that with a short example of one night playing for tips. I was playing strictly for tips in a southern town that has a horse track. People come from all over the country to bet at the horse races. Each night after the races they are looking for entertainment. This night was no different. A race fan had come into the room I was playing and rather loudly stated, "I'll give you one hundred dollars for every Elvis song you can play." After twenty he paid up and left. I made over two thousand dollars that night. Is that a viable way to get paid? Well, yes.
Getting tips while playing a gig in which you are being compensated by the club has always been the norm. Playing for tips alone is risky, but if you can read the crowd and play what they really want to hear you can make a good amount of money. I have a friend from Austin that plays this way exclusively. He picks a joint, goes in and has a beer. If he thinks he can entertain he asks if he can turn off the juke box for an hour. He has a simple set up. He plays for as long as is profitable and then hits the next joint down the road. The key here is sizing up the crowd before you ask for the time. He is very good at this.
I know you have seen the street musician. I would not recommend this to anyone. Some very talented musicians can be found in major cities and they make a good amount of money. It takes a very special type of person to pull this off. It can be done though. Get out there and apply your trade. If it means spending some time playing for tips, then do not think you are too good for that. Just play. Being in the right place at the right time means you have to be playing somewhere all the time. No matter what the venue, play and have fun.