I play 100% by ear and it works for me. Some remmarks through:
- I don't care much about accuracy
- I am bad with reading dots.. this is a factor
- I don´t mind taking a long time to learn a tune (I am sure sheet music can speed up things). My cycle, with recorded music, goes like this:

1 - Listen
2 - Sing, whistle, "billy iddle diddle", tap rythm on table, all day long..
3 - Listen some more..
4 - (Try to) Play

Repeat hundreds of times.

- Daniel