Here in Holland there are some (unofficial?) rules as to max. loudness, but that still means nothing if the EQ/Balance is all gone (i.e. bass-heavy). If a club has a sound engineer he will usually try to balance the PA to be as neutral as the room allows. Sometimes bringing in measuring equipment like graphic analyzers and using 31-band graphics EQs to take out the quirks by lowering the EQ for the problem frequencies a little. What a (good) sound engineer never does is create his/her own sound. You want the system to mimmick the original music as closely as possible. Having your systems set to boost sub-low by 6dB for example will make things sound bad, period.
As for turning the volume up during a gig. This is a normal phenomenon, caused by your ears getting used to a certain sound level. What you perceive as a certain level when you enter the venue, will start sounding lower in level as the evening progresses. As this happens to the DJ too, you always see a slight increase as the night moves on.
Personally I don’t think the “louder is better and entices more people to dance more and longer” thing is based on fact and experience, but alas.
We are in an odd place. It’s allowed to play music at levels that can cause permanent hearing damage after 15 minutes in that environment. So what do we see happen, people running around with 20dB+ earplugs ?!? Except for “feeling” the sub-lows, this is the same as turning down the sound in the room by 20dB, but that somehow is not acceptable. It is, quite frankly, nuts when you think about it.