What goes into a great demo reel? The answer is - only your very best work. Better a short reel with excellent work than a long one with mistakes which need fixing. Employers and clients will look for mistakes, errors, and unfinished work - these are red flags which suggest a digital artist who doesn't complete, or who might flounder under pressure.
Which brings us to the single most important rule of demo reels:
A Demo Reel should be Entirely Free of Mistakes.
What do I mean by that? I mean that there should be nothing obviously wrong with any of your work on your reel. If any part of your work is still a work-in-progress, then don't include it. Or, rather, include it, but only once it's finished.
The best way to judge your reel is to see it through the eyes of other people. Show it to your friends, your colleagues, people whose view you respect. Ask them what they think. Do they understand what you did? Did they like the work? Are there things which confused them?
A demo reel is the single most important weapon in your arsenal when it comes to finding work. Make sure it's the best work you are capable of.
The video above runs about 15 minutes, and covers most of the steps towards putting together a great reel.