Song plays when dancing in company (7)
I believe the answer is:
calypso
'song' is the definition.
(I know that Calypso is a song)
'plays when dancing in company' is the wordplay.
'when dancing' is an anagram indicator (letters dance around).
'in' is an insertion indicator.
'company' becomes 'co' (abbreviation).
'plays' with letters rearranged gives 'alyps'.
'alyps' going inside 'co' is 'CALYPSO'.
(Other definitions for calypso that I've seen before include "Ballad - dance - orchid - sea nymph - moon of Saturn" , "Slay cop with a West Indian song" , "sarcastic air" , "WI song" , "Satirical West Indian song and dance" .)