Mass Hysteria always seemed like the most likely candidate, especially since the eyewitness accounts of "dancing" often sounded more like someone caught up in a manic episode rather than what a modern person would think of as dancing. The name makes it seem stranger than what was likely happening.

Many people in the Middle Ages would often be born, grow up, and die all in the same town, and so you would be more likely to know the people around you than in a modern industrialized urban area. In times where the whole community is facing hardship, I can see one person's breakdown having a knock on effect as the stress of seeing it happen starts putting other people over the edge as well. A sort of collective,.unplanned way of getting it all out.