Good question, GuitarBizarre.
I recently got into a sight reading kick myself, and Neapolitan's over-exageration of people that want to be in the Boston Pop Orchestra are the only ones who benefit from proper sight reading is kind of hilarious.
Sight reading can benefit all musicians, whether they are playing by ear, just learning, or have a masters in the subject.
It makes LEARNING music faster. Instead of spending 20 minutes on 4 measure, a proper sight reader can cut that down to a fraction of the time. It's being able to cut that time down so much that it feels like you get it right the first time (or two) that makes it ever so much more impressive.
Further being able to sight read makes you a stronger musician anyway. It's another skill to your tool belt, and other people you play with will be thankful for it.
Picture this - you are in a band with 3 other guys. You play guitar, you got a guy on drums, another on bass, and another on keys. One of you has to sing and play at the same time. No problem cuz your'e good enough, so don't worry. One of you writes the music for the parts, because, well, they can.
Learning a part from a notated system is magic. It's not the easiest thing in the world, but it does help. And it's all about speed at that point. If you're still on measure 4 when the rest of the group is on page 5, they might start looking for another guitarist.
It's just like reading English. You ever read with a slow reader? You read over their shoulder; you're both reading silently. Then you get to the end of the page, waiting for them to flip the page, then you can't help thinking, "Omg. They're still not done? I've been done for 10 min now." Or maybe the slow reader is you.
So the question is - how do you go about getting this awesome skill of awesome?
Start basic. Play simple things. Things you can go through once, twice, three times at the most and have down. Even if it's twinkle twinkle little star. You have to start somewhere.
Try playing it in four or five different keys. Transpose IN YOUR HEAD only. This makes it more difficult.
Go slow, but keep your rhythm even. Count out loud. 1 ... 2... 3... 4... 1... 2... 3... 4...
Keep yourself honest. Clap rhythms too. Find a rhythm pattern on a piece of music, and just clap it in time. Also, sing the melody lines. Yes, sing. With your mouth. You can do it in private of course, if you don't like your voice. If you can create it with your vocal chords, you can play it that much better. By being able to do that, you'll be able to get a sense of the music in your head before you even touch your guitar.
To keep track when you're singing, give yourself a starting pitch (hopefully in your register). Then sing. When you're not sure, sing first, then check the note. If you're right, keep going. If you're off, fix that one pitch, and keep going.
Rules of sight reading:
1. Go slow and even.
2. Don't start over; even if you made so many mistakes. Finish. Always finish. Keep going.
3. Practice daily for at least a half hour.
These will help you become a better sight reader. When the examples you find are easy, move onto harder stuff. Baby steps will ensure growth.