Most universities require the applied faculty to perform a recital perhaps once a year. And most teachers prefer to perform much more than the minimum. Some form permanent ensembles with other faculty members, others do free-lance playing outside the university. Pay and employment prospects are similar to those for musicologists and theorists. Free-lance playing can mean almost anything.
Some performers are able to make a decent living through free-lance playing alone.
For most, it is only a supplemental income. Clarinetists do not have nearly the opportunities to gig that violinists, saxophonists, bassists, and pianists have. However, free-lance playing encompasses a certain entrepreneurial spirit. Put together an exceptionally good chamber group, or some kind of unique musical offering, and you could be the next Kronos Quartet or Verdehr Trio. This is an area I find particularly appealing.