Demos never did some amazing games justice, like Yakuza 3 and Valkyria Chronicles

yeah for big games (That i know im going to get) demos dont do justice, with smaller games (That im questioning) demos do good

No it means something but not whether I'll buy the game or not.

Most demos are bad anyway.

You can't review a game accurately off a demo, so really I think that a demo only goes so far into providing an accurate representation of the game. I've purchased some games based off a demo only to discover that every freakin level is just like the demo. Conversely, I've also played a few demoes and quickly discovered that a game is not for me. Ultimately I think that a demo should be a companion along with a review as to if you would like a game or not. The bottom line is.. it sure can't hurt.

All I know is, I am much more likely to buy a game if I play a demo of it. Even some bad games have a better chance because you can at least see potential.

The whole reason I bought BIT.TRIP.BEAT was because I got to play the demo of it.

I agree with your friend. Loved pro street demo, hated the game. Hated KZ2 demo, loved the game.

Well, considering the whole point of a demo is to make you want to buy a game, by letting you play a small portion of it (or an "example" level), if you don't like the demo, why would you buy the game?  The purpose of a demo is to let you "try out" a game, hopefully to get you hooked.  But if you don't like it, either it's a bad demo or you won't like the game.  Chances are, it's the latter.  Demos can turn people away from a game just as easily as they can get people excited for it, so developers should make sure their demo is good quality and reflective of their game.