This is pretty much exactly how I got hired.

In my case, I had to show design capabilities in addition to code and being creative didn't mean just applying hacks found on the internet. But my boss had to actually see if I can get through with building the project using a combination of existing knowledge and the ability to find solutions.

My challenge was to build a discussion forum from scratch with user registration and a reasonably attractive UI. So that's PHP + Photoshop + CSS/HTML/JS