Spec Work is an industry term that refers to a designer presenting a design to a potential client before they actually get the job. Clients say it is a way to see if the designer can do what they want but since no pay is exchanged for this work it is basically working for free.
Students are highly targeted for spec work since they are building portfolios, but a designer at any level deserves pay for their work. Think about it, they person needing the work done is going to profit from your efforts so you should profit for doing the work.
When I get requests for a job I take down what they want, then I provide an official quote for the job along with a contract. The contract just simply states they are hiring me to do this project and I expect payment for my work. If by chance you have trouble collecting a signed contract will usually take precedence in court.
For anyone hiring a designer ask for credentials, and check out a portfolio to determine if they are right for the job. Check out a previous post for more information on how to hire a designer.
Great info about spec at http://www.no-spec.com/articles/ten-reasons/ if you would like to learn more.
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