I think of it like this: covering someone else's songs note for note can show how far you've come skill-wise, because most guitarists know what it takes to play certain songs (Like Slash, Buckethead, any of the greats). But playing your own stuff shows off your own creativity. Some people are more impressed by technique, some are more impressed by original pieces or licks, especially if it brings out those goose bumps you get when listening to a dramatic part.
I'm impressed by both. I like to see good technique combined with original pieces. But I love covering songs and listening to covers as well.
~Rusty
