> Instead, they are looking at what you’ve actually done
> (programs, web sites, Iphone/Android apps, work on open
> source projects, etc).
Which is why I tell everybody I know that’s interested in software as a career to get invovled with open source projects. Pick a project you like in an area of software development that interests you, look at the outstanding bugs and feature requests, pick one of those that interests you, and FIX or IMPLEMENT IT! Rinse and repeat.
Soon, you become a known entity among the project’s cognoscenti users, and you have real life accomplishments to present to prospective employers. It’s even possible that they will come looking for you.
Bingo! This part can't be emphasized enough. That is probably the biggest payoff in working open source--getting the good contacts. Plus, if you work for a proprietary software company, there is a very good chance you may not even be able to show your contribution to a potential employer. On the flip side, I've always thought that OSS projects were a little Marxist. I've seen a few software companies that tried to compete with them--its not pretty.