It's part and parcel of the way I learned to play guitar, too. in fact, I think that playing by watching and hearing someone else play is part and parcel of "playing by ear", since you learn to associate chord patterns and playing techniques with the way they sound when played. For this reason, I think that instructional videos are more effective than instructional tapes or CD's.

Also, as has been pointed out, it's easier to follow the lead player in a jam session if you can visually recognize the chords (s)he's playing, since it may be difficult to hear him or her over another player standing or sitting closer to you in the circle.