It varies with the audience. If they are talking a lot amongst themselves I leave them alone and maybe just make a general announcement twice a set or so (Welcome, glad to have you out, if there's any special I can play for you please let me know...). If they are attentive or seem pliable then I'll say something interesting about the song I'm about to do (who did it, why or how I arranged it, or a funny story related to it). If they applaud then I do more of that, if they don't then I do less. It's a flow thing.

One club I play it has an "intimate" setting - meaning I use no mic because everyone sits rather close and I treat the gig like my living room - asking people what they'd like to hear and conversing between every song. That's the setting that I make the most tips with.