Combination. Early on I read and count but after a billion repetitions it becomes internal. I usually look for something similar to something I've played before so I'm learning it as a variation of something I already know. Or I try and shortcut it by figuring out the phrasing, which for me can frequently burn something into memory quickly. To me, it's the difference between reading from a script and capturing the nuance of emotion in the words that comes with practice.

Though, of course, at a high level you should pretty much be able to capture the nuance at first read, but I readily admit my reading skills aren't to that level yet. I'm still in the sounding-stuff-out phase.

Take a look into Dawn Richardson's Beat books.  You'll have lots of fun, and you'll learn some cool beats.  Then look into Tommy Igoe's DVD.

I've been using Tommy Igoe's DVD with good success.  I still use  "A funky primer".  It works for learning a lot of rock beats and has been great for practiceing in all sorts of ways.  It will not help you learn to read music though.  Of course instructors help....especially when you might be learning something incorrectly which has happened to myself.

You know it's funny. I've decided to concentrate on the learning beats by following the music/notation. It was like I had to re-learn the beat even though I already learned it through hearing/practice.  But I think in the long run learning by reading the music is key because now I already able to look at a new beat and play through it.

OB