A director's reel may be comprised of previous projects you've completed. These projects may vary from newsreel footage to photography to other short films.
You will probably want to demonstrate some ability to use visual storytelling for dramatic development during at least one portion of the reel. The reel does not need to include sync sound, but it may.
You may collaborate others to help you create the reel -- a Director of Photography, an editor, and actors. You may also use footage from earlier projects that you participated in as a DP, editor or director.
Please only use music legally for your reel.
You may want to even shoot something as simple as dialogue from one of the winning scripts, using a flip cam and some good light.