In Erf, Dance-Fighting is a leadership mechanic used in combat to add a significant attack bonus to a stack of units. While it is clear most factions know of dance-fighting and can use the skill, the exact mechanics of the effect have yet to be explained in the comic.
Knights In Stanley's Service - The Knights in Stanley's Service, populated by elite Hobgobwins, are led by Lord Stanley The Tool himself. They adopt black leather 'armor' and warpaint, wield axes, and generally have a Heavy Metal Appearance.Erf-b1-p076
Wanda Firebaugh - This dance-fight was impromptu and planned by 'Lord Hamster' after some careful study. Wanda led an army of several thousand Uncroaked in a rather thrilling push against Ansom's forces
The units that are to receive the dance-fight bonus must be wearing uniforms of a similar theme, and act 'in-time' with one another. It also appears that, to initiate a Dance-Fight bonus, the 'dancers' must have a leader; typically this role is filled by whomever is leading the stack. Once the Dance Fight has commenced, all of the units in the stack appear to gain significant combat prowess against non-dance-fighting units. If two factions pit dance-fighting stacks against one another, they are usually matched in power, if all other variables remain equal.
Alternatively, dance-fighting may be a completely different combat mechanic, where non-dance-fighting units may automatically forfeit. Furthermore, losing a dance-fight might not croak units, but rather humiliate them and cause them to rout. If combat is stack-vs-stack, then the dance-fighting units in a stack represent the entire stack in the dance-fight, and can save non-dance-fighting units from humiliation.
Real World References
The Transylvito dance-fight style is an obvious homage to The Jets from [West Side Story]. Their battle-cry is even a parody of the lyrics from the Jets Song.
Lord Stanley's dance-fight style is inspired by the American Rock Band, Kiss. He himself wears the face-paint of Peter 'The Starchild' Stanley, as their names draw an obvious parallel. The 'Knights In Stanley's Service' (K.I.S.S.) are based on a) the Kiss Army, Kiss's massive fan-club, and b) an accusation that the band name KISS once stood for 'Knights in Satan's Service'.