Why are cover letters limited in value?
First, most people believe that the cover letter is read before the resume. Wrong. Just ask those who consume any portion of the work day reviewing resumes–they peculiarly go past the cover letter instantly to the resume and only look at the cover letter if they are still interested after their initial resume review. It is actually rather amusing to watch a Hiring Manager reading a newly arrived resume. The cover letter is situated to the side, and the resume is scanned first, and then read. And you know there is interest if they finally make their way back to the cover letter.
Second, most people believe that the cover letter should be about you. Wrong again. It should be about the company, your prospect, your target. Your resume will expose them everything they require to know about you (if it is well written). If you are interested enough in the company to do an initial contact, catch the time to fully reflect your understanding of the company and how you may be able to meet their needs in your cover letter.
Third, and most essential, many college students end up using the cover letter/resume mass mailing/e-mailing/posting as a crutch to persuade themselves that they are actually doing something in their job search. "But I sent out over two hundred resumes!" In reality, all they are doing is generating rejection letters. Mass mailing/e-mailing/posting of your cover letter and resume has extremely low odds for success in today's job market.
Please assume that at the entry balance a resume and cover letter on their own do little good. Larger companies have based college recruiting programs which serve as the focal point of entry level hiring. As a result, unsolicited entry level resumes are often ignored. Many small and medium-sized companies do not have the internal resources necessary to train entry level hires, so the entry level resumes are simply filed. The best you can hope for in a blind mailing campaign is that you will be filed away and perhaps miraculously considered at some future date. Highly improbable.
So when should you use a cover letter? Only as part of a limited, destined campaign to reach potential employers. Take the time to examine and understand a company before committing yourself on paper as their next potential employee.
If you have no idea what a company does, don't just send your resume and cover letter in blind hope of making a potential match. If you're not willing to invest the time and energy to find out whether a match is possible, why do you expect the Hiring Manager to do so?
When a cover letter is used, it should be concrete and personal. It should be clean, clear laser copy, yet not mass generated. Each letter should refer to a concrete person at a specific company and offer a specific next step of action that you will be taking. Don't expect the employer to do the first step. If you wait for them to call you, your odds of contact decrease dramatically. It typically requires a proactive response on your part to move the process forward to the next level.