I enjoy both playing myself, watching someone else play (depending on the game, I remember back when I was younger, my friend would invite me over to hang out, but then he'd sit by the computer playing WoW, expecting me to watch, talk and come up with something else to do... not that fun) or watching Let's Plays. I'm not so much for watching walkthroughs with pure info, or gameplay without commentary. I also do Let's Plays myself (currently OoT! (shameless selfpromotion ftw!)).
When I was younger, I used to watch friends play single player games (or they watched me) and we kinda played together by figuring out stuff and experiencing the story together. But now that I'm 25, we don't really have the time to hang out that much anymore, and when we do, we generally play multiplayer games, so it's been quite some time since I did that.