There is so much to illustration, and it's almost hard to say what is good and what is bad. Personally, I think I can tell what is a bad illustration, something that doesn't look like it has much effort to it, or any unique quality to it. I don't like Microsoft clip art at all, it lacks.... beauty.
Illustration is also applied to packaging to create a unique peice. The whole line detail, hand made type gives an organic, eco friendly feel.
Also used in advertising campaigns, great effect and beautiful styles.

I think being a good illustrator is a key asset to any design business.
http://abduzeedo.com/when-illustration-meets-typograpy
Date Accessed: 28 Jul 2009
The Die Line
http://www.thedieline.com/
Date Accessed: 28 Jul 2009
PokeStudio
http://www.pokedstudio.com
Date Accessed: 28 Jul 2009
McCord Web Design
http://www.mccordweb.com/e-newsletters/2005/may-05.html
Date Accessed: 28 Jul 2009
Rod Hunt Illustration
http://rodhunt.blogspot.com/
Date Accessed: 28 Jul 2009