One interesting side effect of being carfree is that you quickly become a familiar part of the scenery in your neighborhood. Motorists travel the streets rather anonymously in their enclosed vehicles. On the other hand, a person walking or on a bike is seen by everyone and easily recognized by friends and neighbors.
I'd guess that nearly every horn honk I get from cars whizzing by is not from anyone who is trying to startle me, but from people who are just trying to say hi. Most of the time, I can't look up fast enough to see who it was but my policy is to always smile and wave just in case it was a neighbor or a friend.
I also use the smile & wave thing when it looks like a motorist might pull out in front of me or hook me on a turn. It may feel a little dorky to do that, but it always makes them pay attention to their driving, and they usually wave back.