For storytellers, there are two sides to that maxim. And they are both valid, depending on the circumstances.

Go with the flow and incorporate it.
As storytellers, one of the things we have the ability to do is improvise, especially when something goes wrong. If an audience member's phone rings, incorporate it into the story. "And then the Wolf's phone rang, but it was a wrong number." Or, "The Wolf's phone rang, but he was in the middle of his story, so he didn't answer it...and then he turned off the ringer!" Then, move on with the story.

Don't stop, just keep dancing
Often, the situation calls for NOT acknowledging the interruption, mistake, or accident. These are times when to do so would bring further attention to the incident and take away from or not serve the story. In the show with Dustin, one time I jumped ahead and missed a whole section. Dustin was a trooper and merely adjusted his lines to accommodate the missed piece (THANKS Dustin!). One afternoon in the same show, an audience member's phone DID ring, TWICE! There was nothing we could do to incorporate the distraction, so we just went on with the show (the lady did apologize afterwards).

You can practice forever, and try to think of every possible mistake, interruption or distraction, but the reality is that making that decision is instantaneous, and only comes from experience. The more you tell, the more instinct you will have regarding whether you should say something...or just keep dancing!