I said that hearing things better does make you (the royal you - everyone on stage) play a little better - it does. I didn't imply that not having the best circumstances meant that we give up on trying to do the best we can - nobody I play with takes that approach.
When there are distractions - the guitarist is too loud, you can't hear yourself or the singer well, no matter how good you are, some of your energy is spent dealing with distractions. You can still play very good music, but it isn't absolutely the very best you can do. When the distractions are removed, you can get in your flow state, and the music can be transcendent - assuming you did your homework and are prepared.
I don't know if you've ever had that kind of experience, but part of getting there is figuring out all the little details (prep habits, gear, instrument setup, etc) that get distractions out of your way. IEM's are a part of that formula for me.