I've been chewing this over a bit. Some random thoughts ...
I'd be hesitant to answer the question "Is sight-reading important?" in any universal way. I think it depends a lot on the individual player's goals and the kind of music they are playing. For example, I'm a huge fan of classic blues and boogie piano, and very few of the old masters could read music at all much less sight-read. Heck, very little of what they were playing was written down in the first place ...
"Is sight-reading important TO ME?" Somewhat. Since I'm primarily interested in blues and adjacent genres, I'm mostly learning songs by ear, improvising, etc. I do pick up licks and tricks from sheet music, but it's not really the sort of process that requires me to sight-read in real time. Having said that, decent sight-reading skills certainly allow me to learn that material faster, if only because I don't have to sit there and hack out things note by note.
Goal-wise, I do like the idea that I might get good enough to sit in with people, play some pick-up gigs, etc. To that end, I think I'd mostly be working from fake books (which is a different kind of sight-reading, I suppose), playing by ear, and just generally having a lot of genre-specific comping and soloing techniques under my belt so that I know what to do even without sheet music. However, I can certainly imagine some situations where there might be full-on sheet music that I'd have to work from, so I do work on sight-reading a bit toward that end.
As far as what I actually do to practice sight-reading, I used the Improve Your Sight-Reading books by Faber back when I was doing more traditional / classical piano. These days, I have a bunch of genre piano books (mostly the Hal Leonard Keyboard Style Series) and work from them, starting by sight-reading through the various exercises and tunes before I start learning them more seriously. Those fit my goals well, since they have the kind of piano parts that I'm likely to play (e.g., RH chords and LH bass) in the relevant contexts.
So, yeah. My thoughts about that. 🙂