Anyone who has ever written a story has probably heard the mantra "Show, don't tell." From the time I started writing, this was thrown into my face by teachers, all of whom were convinced that this was the best way to write. Even a good joke is told this way. After all, if your audience doesn't understand the joke and you have to explain why it's funny, it has lost its humor. A joke is supposed to "show" the humor, not "tell" it. Many who teach creative writing claim story writing is just the same. You're supposed to show your audience that your main character's fatal flaw is his heel, not tell them.
I would argue that it is supposed to be both. A good writer will show but not tell. An excellent writer will do both. (This is not to say these are the only qualities I would look for in a good or excellent writer. I simply choose to focus on this particular subject at this time.) After all, if you make your readers infer too much, they may become bored and abandon your story for something easier, with far less work involved. But at the same time, if everything is handed to them, they may also become bored and look for something a little more challenging. As in life, I strive for something in the middle.
For instance, I will usually try to show my characters' traits — the antagonist will be cruel towards friends and others, while the sweet old lady who lives next door will make cookies for all of the neighbors and always have her door open to visitors. I don't have to say, "Mickey hated people" or "Mrs. Cole was generous" because I can just easily let them show these traits for themselves, sometimes even more so. However, it might be important to tell my readers that Mrs. Cole lost her son two years ago and her husband a week later, and sharing cookies with the neighbors is her way of coping with her loss.
I like to think that it is important to show and tell because of an age-old tradition in schools. I truly hope they never get rid of this tradition, because it teaches children how to tell a good story. Usually in kindergarten, each child is allowed to bring in one item from home to show to the class and tell them why it is important. Notice: the assignment is to show and tell, not either/or/not/but/etc. Both parts are equally important. After all, sometimes if you just show an important part of the story, your readers may miss it.
In short, when someone tells me "Show, don't tell," I explain to them why I feel it's important to do both.