When traveling though airports, I too have seen many people carrying guitars and other instruments. This is past the check in and security so I can only assume that they are carry on instruments.
Smaller ones like violins will fit in the overhead bins but I'm guessing that most are placed in the crew storage area at the front of the plane where you generally enter the cabin. Of course, that depends on the space being available and the stewardess allowing it to go there.
I have also seen some airlines request people to allow their large "carry on bags" to be stowed in the hold by the ground crew, after all the checked baggage is loaded. I have had several of my bags handled this way, especially on those really small commuter hops.
I even asked a few musicians with guitars about this and the response was that they asked nicely to store it in the crew storage. Sometimes it worked and sometimes not.
In my several trips to Argentina, knowing that I was a musician, I was asked to bring my guitar. I declined each time simply because of the hassle and expense and regulations on it, asking instead for someone in Argentina to provide a guitar when I would need one. That worked out OK.