Try and improve both. But it is more important to learn to play be ear, because then you can function as a musician in the folk world. If you can only play from dots, then you are lost without them.

But ... if you can read music, it is a much quicker way of learning tunes because you can go away and practice them on your own. By ear, I find even if I've picked it up OK in a session, I've forgotten it again almost immediately.

Or get a little digital recorder, then you can learn by ear and not worry about written music.