Being able to read the dots is like playing by ear, being able to read chords, being able to improvise etc. They're all useful skills and the more of them you have the greater the variety of music you'll be able to play. One of the problems I have with the way that guitar is taught to kids a lot of the time is that they have to choose to study EITHER classical guitar (dots) or contemporary guitar (chords, etc). Surely it would make sense to give them a decent grounding in both and then let them decide which they want to concentrate on?