Open source experience shows one important thing above all else: You actually LIKE doing development!
From the hiring standpoint, this is HUGE. I want to hire and work with people who are genuinely interested and passionate about what they do. While I can respect people for whom development is a job, and nothing more, I'd much prefer to work with people, who like myself, finish up their day job, and then start working on side projects, open source projects, teaching themselves some new technology that just came up, playing with a different language or framework to see what they can learn, etc...
Sure, but then how do you prove you did any work on the project? A lot of companies won't let their source code out of their site so you can't brag about some clever hack you wrote. With an open source or free software project, you can just say "look up revision 12903810938 and the file is awesome.c" and voila, your example of clever hackery is there.
From the hiring standpoint, this is HUGE. I want to hire and work with people who are genuinely interested and passionate about what they do. While I can respect people for whom development is a job, and nothing more, I'd much prefer to work with people, who like myself, finish up their day job, and then start working on side projects, open source projects, teaching themselves some new technology that just came up, playing with a different language or framework to see what they can learn, etc...