I was sort of raised with this mindset it somethign my mother oft repeated when I was being rude(talking back) or making too much noise in public. I support the good intention behind this mindset and not the negative ways it can go overboard.
I want my children to have a voice and learn how to make themselves heard, appropriately. In different life situations they will have to know to speak up and stand firm when others are not listening or they have to defend themselves. I want them to have the skills to do this. I myself have a heard time in this area, not because i was allowed to speak up as a child, but because of my own timidness that unknowingly my parents aided and abetted by assisting me in difficult situations instead of letting me handle them myself.
With that said, it is interesting that I came across this thread. I have just in the last few weeks started saying this exact phrase to my 4yr old. In those cases he has either been being very noisy and creating too much havoc for my leient tastes or when i tell him something to do he does too much talking back(in most cases I feel it should be nil). As for the noise situation, I don't mind my kids acting a lil crazy or quite a bit crazy around the house, we don't go out much, but I do have to teach them that behavior like that is not always acceptable or appropritate. There is a time and a place and because we are not often in formal settings, they never really get the taste for it, but when the time comes and I may have more appts or meetings etc.. that I have to take them to; they need to know how to act, and at those times they will have to be quite. Of course I am still keeping age appropriate expectations in mind and providing them with reasonalbe activities to keep them busy.
As for back talk I don't know how to call it. There are times when I feel my 4 yr old is being disrespectful when he always has something else to say after I've spoken. Then there are lots of times when I realize he was only trying to communicate his side of events that I may not have been aware of or considered. At those times I feel bad for not having thought the whole situation through and maybe jumped to conclusions on a matter. However in most instances, since I know my child, he is often back talking to try and make an excuse for some inexcusable behavior.
So I don't think there is some hard fast rule about being seen and not heard, the statement on a whole is actually quite unreasonale. In terms of the respect due to one's parents this is a scenario where i think this rule applies in moderation.