The harsh reality is, however, that many employers do not consider the years of experience to be equal to or more valuable than the piece of paper that represents a PhD.
The experience of earning a PhD is not something that can be easily reproduced by "work experience." In the process of putting together a doctoral thesis, one not only learns how to set up reactions, perform experiments and use different instrumentation, but one also develops an understanding for how to science works and how to conduct research in an efficient and productive manner. If the only experience someone has is working for industry on a specific project, with set milestones, in a very narrow and specialized field, there is no way to develop the critical thinking pathways that allow one to become a good scientist. Again, to second what Bryan Balazs said: the discipline and perseverance that it takes to actually earn a PhD is unlike anything that can be accomplished in an industrial setting. If you don't like your job in industry, chances are you can find another one. If you don't get a long with your academic advisor, you better suck it up and find a way to get along with him or her otherwise you have wasted a great deal of time and energy without anything to show for it. So no matter how you slice it, several masters theses and lots of work experience does not equal a PhD.
As one good turn deserves another, I'd like to second what Yanika posted, and go a bit further: I have seen in some postings what I believe to be a fundamental misconception of an MS vs. a PhD, statements along the lines of, "Well, if I spent 2 years on my MS, and have 5 years job experience, then I have the same qualifications and skills as someone who spent 5 years on a PhD and has 2 years job experience, right?" Maybe, maybe not. A PhD is not simply "several more years of doing the same thing as an MS degree." I do sincerely believe that someone with an MS and 5 years experience (using the above example) could indeed be more productive and valuable to an employer than the PhD employee. However, the employer may be looking for someone who has substantial experience doing independent research, from being able to identify a scientific problem, define the boundaries of the problem, establish a research course of action to address answering the problem, conduct the research, recognize when dead ends or wild goose chases are creeping into the research, interpret the results and identify possible sources of error or bias, discuss with peers, and publish the information, results, and conclusions in a scientific paper, all skills that should be learned as part of the PhD degree process (whether they *are* actually learned is another story). While some MS employees may have learned these skills at some point, the chances are greater that a PhD will have them.
If you didn't learn how to set up reactions, perform experiments, use different instrumentation and develop an understanding of how science works in undergraduate school I would go ask for your money back. I learned all of those things in the process of getting my BS in chemistry.
Bryan I was able to learn all those things you listed as a result of my undergraduate and graduate schooling in combination with work experience and yet life's complications did not allow me to finish obtaining that little piece of paper that people seem to think so highly of. Personally after 30 years of working in industry I would not give you a wooden nickel for most of the PhDs I have worked around in that time. They were much less capable in my experience than people who have the basic education and work experience mixture.
Reading the comments here verifies my impression that getting a Ph.D. is like getting a prison record on your job record. You eliminate yourself from 90% of the jobs out there but the remaining 10% may pay very well. Right now I would 10 times rather go for an MBA or a J.D. if I wanted to continue my education. There are way too many Ph.D.s out there in the job market competing for way too few jobs. Why we continue to educate so many people to such a level when there are not jobs for them is beyond me.