Music critic Barney Hoskyns criticized the lyrics for being "almost too contrived as tintype portraiture" and for asking the listener to be enchanted with the characters without the song creating a "compelling vignette from the material." Jason Schneider similarly describes the song as "overwrought." But other critics have found a deeper meaning to the lyrics. Allmusic critic William Ruhlmann states that the song comments "on the falseness of show business." The Band FAQ author Peter Aaron describes the song as "an allegory for the music business." Nick DeRiso sees the "escapades" and "ruses" described in the song as creating "an allegory on the dangers of the lifestyle that had rapidly ensnared the Band" during their meteoric rise to stardom with the two albums they released before Stage Fright. To DeRiso, the "snake oil" of the medicine show represents the "late-night escapades and mid-day binges — the mysterious, soul-deadening, very real temptations of the rock-star lifestyle" DeRiso believes that the message was primarily directed at Band pianist Richard Manuel, whose life was falling apart and who was also believed to be the intended recipient of the message of "The Shape I'm In," the song immediately preceding "The W.S. Walcott Medicine Show" on the Stage Fright album. C. Michael Bailey had a different take on the song in the April 2012 issue of All about Jazz, stating that the song represented the American archetype of "celebration and good times."
