Good - Nirvana covering Bowie's "The Man Who Sold the World" as well as Hendrix's "All Along the Watchtower" are obvious ones. I know a lot of people didn't like APC's Emotive (more or less a covers album), but their versions of "What's Going On" and "When the Levee Breaks" are just breathtaking.
Bad - Pretty much anything following the "Punk Goes Crunk" mindset, i.e. ironic metalcore covers of pop songs. The "Since You've Been Gone" cover was entertaining, but the trend really should have stopped there.