I’ve been hired for several internet jobs because I had a degree. After the bubble burst, many places would not hire someone unless they had a degree. One employer said “if you can’t finish a degree, how do I know you can finish the work here?”

I think it is not about one or the other. At some point of your life, having a degree will make a difference. However, it will depend to grand extent on the field you work. As far as I am aware there isn’t a Degree in Internet Marketing (there are Bachelors in Marketing), or any other new discipline. Universities tend to catch up later with knowledge that is not coming from their own institutions.

I think there is nothing like a well balance diet: a good degree and real experience. To probe my idea that degrees are important in the online world, take as example Google’s founders. They created the engine as part of their PhD.

I teach at university. I think the problem is that students tend to just “attend” classes and do the bare minimum to enjoy the “student life”. For example, if you teach PHP, they will limit to solve the problems/assignments that you gave them instead of trying to build the new Facebook, Digg, or whatever. Then, it is fault of the University that they haven’t got “enough exposure” to technologies.

Again, there are examples of people who didn’t have a degree and succeeded in life. However, there are far more who succeeded in part thanks to a degree.