I'm classically trained in piano (13+ years) and reading sheet music fluently was integral to practice, but I also have been getting into improvisation and playing by ear over the last few years. I think knowing how to read sheet music and play by ear are both valuable, sheet music provides a visual medium on which to notate time, pitch and dynamics (how precisely to follow the markings of course depends on the genre). It'd be a nightmare to learn a Bach fugue by ear though.

Personally I think it's great fun to be able to read music and play a piece you've never heard before, and bring your own life into it just as it is fun to sporadically create the unwritten.