There are lots of skills necessary to be a great Choreographer. Obviously a knowledge of and experience in dance is necessary and in my book, the wider the knowledge base, the greater the scope for creation. Skill as a dancer is also useful, but exceptional skill may not be necessary. Many great Choreographers have become so after dance careers that may have been less than stellar – but their passion for the art form has kept them returning to the craft and led them to find other ways to contribute.
Here’s an interesting article on that take: http://www.danceadvantage.net/2012/09/28/great-choreographers/
For Choreographic work in Theatre the skills are specific. The dance should, whenever possible, further the story or service the plot in some fashion. While the style may still be presentational, it should fit within the world of the play or musical. While I enjoy the acrobatics and technique of a superbly performed routine, I will always appreciate movement that tells us about character and storyline to showy moves. When superb technique is available and can be crafted and utilized to further the character and plot, then exceptional choreography is taking place and can be transformative for the audience.
Knowing when to keep it simple is also a great skill. There are times when the character or performer or moment in the story needs very little movement to garner a reaction with the audience. Knowing how & when to make use of simple movements to “move” and audience is an essential skill for a choreographer.
Speaking a language that the team can understand is vital. Dancers have knowledge of specific terminology and a shorthand that may mean nothing to the Musical Director or the Stage Manager or even some of the performers. A good Choreographer will have the skills to communicate their work and their needs for support in design and vision to the entire production. For example, the ability to read music is essential for strong communication with the team.
The next time you are in an audience, ask yourself to analyse what the choreographer has assembled. Does it speak to you? Did it help you understand or appreciate the story or the characters? Did it “move” you? If so, then you were witnessing some great Choreography.