u/mr_funtastic, your question and source present several problems and I'll try to answer some of them. I'm not a historian, but a journalist, and a Brazilian, and a native and resident of Rio de Janeiro to boot, so I will take a crack at it and hope that the mods take pity on both of us and let this answer stand. I'll use as sources old and new newspapers (as primary sources) and Wikipedia (tertiary, for figures and such), as well as Guinness World Records, your own source for the question.

First, the date and location: every 31 December, Copacabana Beach hosts one of the world’s biggest New Year's Eve public celebrations, with fireworks displays and, since 1992, free concerts, with multiple stages (some for concerts, some only with screens transmitting the concert, to reach more people, since Copacabana has some 3km of beach). Therefore, as Wikipedia (but not, currently, the Guinness, see 3rd paragraph) notes in its list of biggest free concerts: "The following are free concerts with reported attendance of one million people or more. It also includes multi-artist festivals which may not be directly comparable with single-artist concerts. Attendance numbers for many of the kinds of events listed here rely on estimations from the promoters and are known to be exaggerations".

Therefore, the 1994 Rod Stewart Concert was part of a series of concerts presented in a public place, with free attendance, as part of the New Year's celebration. That's where your question gets tricky to answer: can we say that people went only to see Rod Stewart (and then, maybe, take a shot at why they went)? No, we can't. Can we say that people went to see several Brazilian and international artists, with Rod Stewart as a headliner, as part of a bigger celebration? No, we probably can't either, since we would be discussing the motivations of millions of people and that's a little harder to source. The latter is more probable than the former, but there is no definite, clear cut answer. We have a possible comparison: on 2006, The Rolling Stones made a show in the same beach, with the same multiscreen configuration, also free, but not on New Year's Eve, and had an estimated 1,5 million people in attendance (sources NYT and Wikipedia), which places it, according to Wikipedia, as the 6th most attended free concert. Therefore, we know that a single concert, at least as big as the Rod Stewart one (taken as a single show and not as part of the New Year’s Eve celebration – and I will not go into the confused and irresolvable discussion of if Rod Stewart or the Stones are the biggest stars), had an estimated 2 million less people (maybe even 2.7 million less, see next paragraph), so we can probably say: Rod Stewart’s concert had lots of people present because it was 31 December, in addition to being Rod Stewart.

The second problem: the number of people present. Currently, the Guinness World Records registers that show as the biggest free concert attendance, as you said, but with an audience of 4,2 million, 700k more people than your number (which Wikipedia, quoting Guinness Web Archive webpage, registers). And where does either of those numbers come from? The best source I could find was O Globo's (Rio's biggest newspaper) front page for 1/1/1995, which mentions "almost 4 million people" as present on the beach and calls Rio's “the world's biggest New Year's Eve party”. Riotur, Rio’s government agency for tourism, does not have a number for 1994 attendance of either the Rod Stewart concert or the New Year’s Eve party as whole. It does, however, have numbers for attendance in more recent years parties. In 2018/2019, it had an estimated 2.8 million people present and Riotur’s president says that one “broke all records”, therefore, to the organizers of the party, the 2018/2019 event was the biggest one, and even so, with a smaller number of people in attendance than either of the numbers Guinness had or has.

So, the facts, as we have them, are: there were a lot of people at Copacabana Beach on 31 December, 1994, they were probably there for the bigger party and not only the Rod Stewart concert, as they are every year. Now, as to why people go to the New Year’s Party in Copacabana in such huge numbers, that’s a separate question that would probably deserve its own post (we could make an argument that the small number of free entertainment available in Brazil provides part of the incentive to go to a public party, in what amounts to a public park, but that’s merely an informed guess).

SOURCES:

Guinness World Records Current - https://www.guinnessworldrecords.com/world-records/73085-largest-free-rock-concert-attendance

Guinness World Records, web archive, as quoted by OP and in Wikipedia - https://web.archive.org/web/20060525134411/http://www.guinnessworldrecords.com/content_pages/record.asp?recordid=53418

O Globo’s archive, in Portuguese - https://acervo.oglobo.globo.com/

Rolling Stones in Copacabana Beach, both in The NYT and Folha de São Paulo (Brazil’s biggest newspaper) - https://www1.folha.uol.com.br/folha/ilustrada/ult90u58013.shtml and https://www.nytimes.com/2006/02/19/world/americas/the-stones-rock-15-million-in-rio-days-before-carnival.html

Riotur numbers for 2018/2019, as quoted in G1 (Brazil’s biggest online news site), in Portuguese - https://g1.globo.com/rj/rio-de-janeiro/noticia/2019/01/01/multidao-acompanha-espetaculo-de-fogos-e-shows-na-festa-de-reveillon-em-copacabana.ghtml