My club steam room and sauna (gender-segregated in the separate locker rooms) both have the 'rules' stenciled in vinyl letters on the glass doors- swimsuit or towel/covering required. That doesn't stop many guys from choosing to completely ignore the rules and go in bareassed naked - usually sitting on a towel. This is most common during the evening (like 8:30 pm and after) when the gym seems to be used least frequently.
Some guys will go naked- especially in the sauna- and will sit and read the newspaper, using it to shield their body from the other occupants- or, by tilting the paper forward- provide a full view to only one or two guys while blocking the view of others. I guess some guys like the attention- and enjoy getting a bit excited when they know that they are being stared at.
In our club steam room, most of the guys will wrap a towel around their waist and sit down- and the prudish guys will keep their legs and knees together (revealing nothing.)
A guy who seem a little more relaxed with the 'bonding scene' may loosen the towel just slightly at the waist, and will allow their legs and knees to open a bit. He will most commonly allow both of his hands to naturally fall on his lap (basically laying right on his cock) which helps to keep him covered- especially if he is among strangers.
From my experience, it's the club 'regulars' who are the ones who know the score: if a guy walks into the room and he can see thru the steam and he knows all the other guys there, he'll come in, sit down, part his legs, and give a direct view of his hairy sack or a helmet tip to the dude(s) sitting on the bench across from him.
If he's feeling a bit horned and feels a bit more daring, he'll unwrap the towel as he sits, so that one edge of the towel lays over the top of his lap- thus remaining 'covered-' until his hardon is parallel to the edge of the towel and comes into view. As for hand position, he'll still have his hands in his lap, but he may cup his balls with one hand and place the other on top of it- allowing an extremely subtle playtime that is difficult to spot in a steamroom- but the guys close to him know it's going on, and it can start a chain reaction. These are the guys that also, when exiting the steam room, stand up, completely open their towel momentarily to re-wrap it around the waist, and show a big puffy semi unit to the guys on the bench opposite them.
To me, it's just male bonding. It's a lot of posing, and 'alpha dog' behavior, granted, but it's all in good fun. And I'd say that the guys get, um, *chubby* only if its a peer group that is of a simillar age group, if all the guys are physically in good shape, and if all the guys are regular gym users who are there 3-4 times a week...otherwise the constant opening and closing of the steam room door, and the regular parade of hairy, overweight, or voyeuristic guys coming and going keeps everyone fairly well covered.