Old-timey, dixieland, New Orleans style, early jazz - swing music. 
Yes to dancing!

Jazz Happy Hour at The Rose Bowl Tavern (Every Wednesday and Friday) features a rotating cast of the best local and regional musicians performing a diverse array of jazz styles and flavors. 5 - 7pm, start the evening with great music, tasty drinks and good times in a cozy-no frills environment!

BYO Food (many restaurants in downtown Urbana)
Never a cover, though tips for the musicians are always appreciated.