The Tattoo is completely different to Edinburgh International Festival and even The Edinburgh Fringe.
The one you're thinking of, and preformed at would have probably have been the fringe. That tends to be big comedy gigs that make money and then everyone else spending money to put on their shows. I'm not sure if how many acts break even. Quality can vary. I spent £15 I didn't want to once while unemployed listening to a shite Londoner spend half an hour talk about erectile disfunction. I also had free shows in a cafe I ran that were really really good.
The International is the orchestras, opera, comedy and more "high" culture type stuff. Usually at very high levels of quality. The end of festival fireworks is possibly the best fireworks display ever, set to live music.
Tattoo is all the marching bands, the terraces by the castle and fireworks waking you up at about 11pm every night for a month. Tourists love it. They can probably afford to pay for musicians... even if it's not much once they shell out for august priced accommodation for the band!