If you are referring to the period in Europe when most witch hunts took place, between 1450-1700, it is important to keep in mind that witchcraft only one phenomenon among a number of different magical traditions that were available. So the second part of your question is most certainly no. Most of the people prosecuted for witchcraft were guilty of two closely related crimes: 1. Heresy, in the form of making a pact with the devil and 2. Performing maleficium, or harmful magic. Maleficium was only one kind of magic. Many people made use of so-called "white magic" for common concerns like healing, love potions, and--of course--for protection against harmful magic. While officially frowned upon by the church, this kind of magic rarely led to any action at all and many of these practices actually had Christian elements. The line between helpful and harmful magic (especially if demonic aid might be involved) got slippery sometimes, but witchcraft accusations were exceptional and really only a tiny sliver of what was going on.

To get to the first part of your question, certain kinds of magic were absolutely tolerated as entertainment--even as respected intellectual traditions--especially in courts. Though arguably a kind of entertainment given the importance attached to forescasting things like dynastic marriages, royal and noble people often employed an astrologer. Jugglers, acrobats, and other entertainers were more likely to perform something more like simple magic tricks or illusions. On the other hand, kings could also perform magic themselves. In England and in France, thousands attended royal coronation ceremonies to receive the "royal touch," supposed to cure scrofula. Again, this was only questionably purely entertainment, but most certainly a major performance. 

Outside the courts (and much more common) there were many charlatan-type healers who might perform "miracles" on the roadside to attract customers. One odd example is a man in seventeenth-century Italy who used to have a viper bite him then cured himself with a potion in front of an audience. Folks like this were all over the place and they were more likely to run into trouble with their competition than they were for performing magic per se. All in all it depends on your definition of magic and on your definition of entertainment, but suppression was by no means automatic or even typical. Hope this helps.