It hardly needs to be mentioned, but "All Along the Watchtower" by Jimi Hendrix. Never has a song been so much more the cover artist's than it was the composer.
Also, "Hey Bulldog" by Toad the Wet Sprocket. More heretical than suggesting Nirvana did a better job than Bowie, but much more true. Toad gives the song an intensity that the original lacked.
And another heresy: Duran Duran playing "Femme Fatale." Yeah, yeah I know, Velvet Underground and such. But well, see, Duran Duran SINGS, while not one in Velvet Underground sang so much as approximated a semi-rhythmical chant.
and the following fall in the category of "worth listening to but not necessarily better than the original"
"Tangerine" by Big Head Todd and the Monsters. No one will supplant Robert Plant (*giggle*) but it's got a unique feel to it.
"Panic" by Puppini Sisters. They do USO style jazz (like the "Boogie Woogie Bugle Boy") and yet they still covered a song by the Smiths. Oh yes.
Run DMC's "Walk This Way." Just because. Really.
Van Halen's performance of "Pretty Woman." Orbison made it sound like a fantasy daydream. Halen makes it sound like a sleeezy dream that comes true. Perfect.
The Ramones "Surfing Bird" Because the Ramones covering ANYTHING is full of win. Their album
Acid Eaters is nothing but hippie music covers done three power-chord-Ramone style.
Rush also has a cover album,
Feedback. If Blue Cheer hadn't done it, Rush reminds me once again why I not only resent but LOATHE a certain country cover of "Summertime Blues"
The Foo Fighters do a fascinating cover of Floyd's "Have a Cigar" on the M:I-2 soundtrack.
David Bowie does covers all the time. And if you aren't interested in hearing David Bowie interpret things, I don't know why I'm talking to you.He has a cover album,
Pin Ups. He cover the Kinks, the Who, Pink Floyd and more. So lovely.
All this talk of Bowie compells me to share this picture: