It’s tempting, right? When our characters are at a dance or a bar (or scooping ice cream from the tub with a sad iTunes playlist on heavy rotation), we can’t help but think of the songs that are playing for them… and sometimes those songs influence character development, or a decision being made… and then of course that needs to be shared with the reader. So we want to quote the lyrics, because just mentioning the title of the song and referring obliquely to “the chorus about how freedom means nothing left to lose” doesn’t have quite the same punch, does it?
Basically, licensing the rights to quote lyrics is a profitable sideline for music publishers, who also tend to be awfully litigious if they catch you using their property without permission. Even a tiny bit.
There’s also this (the second chunk of bold text and the answer below it): http://journal.neilgaiman.com/2005/06/fathers-day-thoughts.asp
So even if you’re Neil Gaiman, they want your money before you quote their lyrics, and it’s non-negotiable.
I have to admit I was a little shocked when I stumbled across the Guardian article, partly because of how much the rights cost, and partly because it’s more than a bit strange that fair use doesn’t apply to lyrics — not at all, not ever. And this isn’t just an issue for self-publishers, because in nearly all cases that I’ve been able to find, it’s the author’s responsibility to arrange permissions, not the publisher’s, and many publishers prefer that you just avoid the issue altogether.
If you still really want to use lyrics in your writing, the steps to apply for permission can be found here: http://annerallen.blogspot.ca/2013/03/so-you-want-to-use-song-lyrics-in-your.html (Be sure to read right down to the bottom, though, for a warning about what can happen if your book does better than expected!)
The (sort of) good news is that it’s safe to reference band names and song titles and paraphrase what the song is about, as long as you don’t use the exact lyrics. Apparently titles can’t be copyrighted and band names are factual information (e.g., it’s a fact that Bob Marley wrote “I Shot the Sheriff” and Eric Clapton later recorded a cover of it), so they can’t get you there.