[John Pearl explains what you should include in your portfolio when hunting for a job in the game industry -- and what you should leave out.]
A long time colleague and friend of mine once put it best: "Never put anything in your portfolio that someone wouldn't pay you for." What that really means is that if it's not production-quality, don't put it in there. Along the way, you'll create work that act as great educational pieces for you personally, but in the end they don't make for a quality piece of work.
One important thing to keep in mind is having an ability to self-critique. If you're a talented environment artist, and you have some character work that's not that great, know when to cut it. If you're a good animator but your texturing skills aren't great, apply a grey material to your animations. Never put anything in your portfolio that puts the rest of your work in a bad light. Quality art is easily overshadowed by a couple bad pieces of work.
I've seen a number of pretty good 3d artists put really bad sketches or concepts in their portfolio. While this doesn't equal an instant rejection it can throw up a red flag to the reviewing party that you can't self-critique. This is an important trait to have as any kind of artist, especially a production artist.
Also, resist the urge to put EVERY piece of work you've ever done dating back to high school. When a position opens up, recruiters/reviewers are inundated with loads of submissions. You want to have a portfolio that can be quickly viewed and leaves a positive impression. People shouldn't have to click through a lot of your old work to hunt for a few gems.
It's important to find that balance of enough pieces to show your qualifications, but not too many that it ends up watering down your best work. In the past I've seen portfolios that started off really strong with a couple awesome pieces followed up by what can be assumed as earlier work that ended making it a middling portfolio.
It's important to show you have the ability to produce a variety of styles and subject matter. Obviously you can't tackle every genre out there, but for every hand painted fantasy texture you create, attempt a more realistic model the next time. As an animator, instead of always doing bipeds, try a quadriped with a tail. This isn't always realistic with school projects and deadlines, but it shows your depth and versatility as an artist.
Know what you're applying for
This may sound a little too obvious, but understand the position you're applying for. Don't apply for a character position if you have nothing to show but environmental art. Don't apply for a concept position if all you've ever done is animation. There is an off chance that your work in a different discipline will be so phenomenal that someone will be willing to take a chance on you for a position you're not qualified for, but it's highly unlikely.
There are a lot of portfolio hosting sites and programs out there currently. It doesn't matter what you use, only one thing matters in the end: Ease of viewing. Try to avoid overly complex and flashy website navigation. Also avoid requiring nonstandard plugins for viewing. If you're not a UI artist, don't make your portfolio your first foray into ui design. A simple and clean user interface on your portfolio lets the work speak for itself. There is nothing worse than your portfolio formatting getting in the way of your actual portfolio.
The presentation of your work speaks volumes about you as an artist. A good presentation shows a level of professionalism as well as pride in your work. If you're struggling for inspiration in this department have a look at some of the industry's heavy hitter's art books: Gears of War, God of War, Uncharted, Darksiders, etc. While you shouldn't steal from them directly, you should strive for that level of presentation. After all, the end goal here is that these artists will be your peers one day.
Most game art programs or 3d based curriculums now have a bigger emphasis on team projects than they have in the past. A lot of them are even modeled after somewhat realistic team structures. Having work from a team project is great and shows that you can work with other people to achieve a larger goal. This is an important skill to have when applying to a job at any company. However, be sure to clearly label your work and contributions in your portfolio. I've seen a portfolio come in and with images of a group project that looked really good with no context for what the applicant worked on. There have been group projects where certain elements were fantastic and we've followed up with the applicant only to find out they didn't work on those elements. Be clear with your contribution in your portfolio.
One last bit of advice when working on group projects in school. If you want to put it in your portfolio, make sure you contribute some assets or hands on work in it. I've interviewed artists, who had the job of "Producer" or "Art Director" on a student project, where they oversaw the project without directly contributing assets or elements to it. While those two roles in a group project act as a good learning experience, they don't do much for your portfolio. Putting images from a school project where you were in a supervisory role doesn't really impress outside of the class room. Chances are you're applying for an entry level job where those skills won't be what the company is looking for.
I've been asked a lot in the past of what to put in a portfolio. Do work that interests you, but that is also in line with the job you desire. Don't fill your portfolio with colorful hand painted textures if you want to work on gritty modern shooters. Some old standbys that you can't go wrong with:
Some things to avoid:
Implementation of your work
If you're putting a video in your portfolio, avoid long intro sequences and long black screen pauses. They're not dramatic they're actually quite frustrating to watch. Also, don't feel the urge to make a video if what you're showing can be summed up better in still images. Animations and scene fly throughs are great for videos, where stills of models and textures are better served as high res still images. Also, avoid cliché music or heavy metal in your video. Music shouldn't detract from your work; it should exist to enhance it.
It's great to have a lot of good looking art in your portfolio, but half the job of a game artist is technical problem solving. While this isn't necessary, it's a great idea to get your art into a game engine. There are a couple of reasons. You'll get the experience of a real workflow, and this will teach you a lot about how you build your assets. You'll have an extra level of experience on your resume. Lastly, it's a great place to take screenshots. Modern engines have most of the bells and whistles traditional offline rendering software have had for years, however it's real time and revisions are immediate. I'd recommend checking out the free sdk of the Cryengine or other free engine sdks out there.