The audience is the crowd of people who have come to watch the on-screen band perform. The rock meter measures their cheering and grades you accordingly based on your performance. The crowd wants nothing less than for you to perform at your very best.
Most noticeable in the Guitar Hero arcade game or in every Guitar Hero game from Guitar Hero III: Legends of Rock onward, and especially noticeable on HD TVs, the crowd mostly consists of a handful of 3 or 4 people who appear multiple times, as if copy-pasted over and over. This is probably due to the fact that the backdrop is for viewers watching the player to look at; the player(s) are supposed to be focusing on the notes.
The size of a crowd is measured by the number of people in it. As the band's career rises, they become more and more popular as they perform at bigger and bigger . The bigger the venue, the bigger the crowd.