I think the design "contests" are frowned upon by many in the design community, arguing that it's nothing more than "spec" work (and specifically sites like the already mentioned 99designs and crowdspring). Some info on this can be found here: http://www.no-spec.com/ (edited to add this link, specifically about design contests: http://www.no-spec.com/articles/design-contests/ ) Personally, I would ask some colleagues…
That said, it's a grey area. I hate it sometimes.. but every now and then I find myself on those sites and it blows my mind to see $2k awarded for mediocre work. That motivates me to spend a few hours and compete for a project or two. It's certainty not sustainable to do it for a long period.