game industry these days *do* actually want to see high res meshes, all zbrushed out and stuff, but not just by themselves. We want to see them with their low-poly counterparts with the normal maps applied and such.

I think demos are mostly important if you're doing animation. Me personally, not being a professional animator, have never really had a demo reel in the typical sense of the word. I've always just gotten a job by sending employers a link to my website and they take a look at my stuff, mostly simple jpg images.