It depends entirely on the scope and rules of the competition..

A competition can be about anything.. the artwork used doesn't have to be unique.. it's the game and coding which are the important things.

Some developers get put off releasing games because of their lack of graphics ability, but they are amazing coders.

Using pre-fab graphics gets around this issue by giving everyone a head start. There is still an amount of creativity required for level design and even game concept, but by removing this initial stumbling block creating good source art, a developer can get something working faster and make progress without spending ages coding a really nice engine only to have it look bad because of a lack of graphical ability.