Many say 'Westerners just aren't into it' but I don't think its cultural at all. I've been out to karaoke with Japanese, Japanese/foreign mixed, and fully foreign crowds in both Canada and Japan, and while the Japanese tend to sing a lot more enka, all combinations of individuals were able to have a great time. The main difference is, as Astroboy pointed out, the lack of suitable facilities. 'The box' offers a lot more privacy for one's own sorry voice and protection against the music of others so that everyone can enjoy their own music without fear of judgment by, or fear of intrusion upon, nearby strangers.
In the right circumstances I think its highly enjoyable. Japanese style karoke is TOPS. All you can drink, hot food, open 24/7, a huge variety of songs, air-conditioned, musical instruments provided in some cases, comfortable rooms, I mean when its the wee-hours and you need to continue the party its a complete no-brainer, head for the karaoke box.