I think it totally depends on the group. Sometimes the fun stems from acting like the character, but sometimes when you're trying to get from one place to another or get into an exciting combat too much play acting becomes a huge irritation. The worst is when different players aren't on the same frequency one night: we had one infamous game where two players wanted to go shopping for cool clothes and other stuff, and to roleplay their conversations, while another player wanted to get on with fun combats. My players got close to a shouting match about it. That's a no-win situation. It all comes down in the end to pacing the action.
There's no question that if one player is hogging the spotlight to the detriment of everyone else's fun, it's the DM's job to rein him in. Also, if a player is trying to have conversations with NPCs just for the sake of "the fantasy world," that player needs to be reined in if the rest of the party is getting bored and wants to move on. If the DM insists that NPC conversations about the latest fashions in Th'Mirkalan as opposed to N'Tar are mandatory for the campaign ... and the players are getting bored because they want to at least fight an orc, then the DM is out of step with the players and the group needs to fix things up. Same if the DM wants everyone to speak in character and the players don't want to.
The game is wide-open enough to support a whole spectrum of play, from the almost purely tactical to something that's got very little action and lots of "interaction" with the fantasy world. Neither end of the spectrum is "wrong," but if you get into a group that operates out of your comfort zone you're going to have a really crappy gaming session. That doesn't mean you're wrong and they're right, but it does mean that you don't fit in with that group unless you're willing to bend toward the type of game they play. If you get a new player who "acts" too much for everyone else or who's embarrassed to "act" as much as everyone else does, it's the job of the new player to fit in and become a member of the group in a way that promotes fun gaming. If an embarrassed player truly can't handle a high-acting game, or an actor keeps overacting in a group that sticks to lower-key roleplaying, the group has to decide how to handle the disconnect caused by the new player.