At parties, maybe. Professional recording jambands, if there is such a thing? No.
There's 5-6 of my friends that get together at every party they go to, (1 acoustic bass, 2-3 guitars, a Cahon, and a singer), and they come up with some epic comedy/most rock genres music on the spot that is usually quite entertaining.
Song names that came to mind: "Fucking Egyptians" "Epic tits" "There was a guy named ____" etc
It's usually fairly classy, despite those song names.