Jeffrey -- I belong to a very small local artist group. There are maybe a dozen of us in the group, and the population of our community is maybe 8000 or so. Each year we do a summer art show, accepting artwork from the public (as well as from our group), and it is displayed in a gallery in the lower level of a local bank. The bank is obviously one of our sponsors, but we also recruit a few other corporate sponsors. A local flower shop provides the centerpiece for our reception, and a local winery provides wine for the reception. A couple of other businesses make donations that help cover advertising costs and costs associated with the show (prizes, honorarium for the judge, etc.). This year, one of our local businesses offered a "purchase prize," in which they agreed to purchase one of the works of art in the show.
All in all, I believe that the local businesses like to have their name attached to our event, and also like to support the arts in our community. Of course, we include the names of our sponsors in all of our advertising and any PR that goes out. It's advertising for them as well as engendering good will in the community.