Certainly influence is important. I’m a music enthusiast and I constantly look at the influences of artists and albums to try and find more music that I might like, and just for curiosity’s sake. But I don’t listen to albums or artists (and I don’t think many people do) because of their influence but rather, as you say, because influence tends to be a side-affect of quality. But that isn’t always the case and it doesn’t seem like a worthy metric for “essentialness” when, had I recorded “Sgt. Pepper” in my basement it wouldn’t be essential but since the Beatles made it, it is.
Great point, AfaH (very weird thinking about typing your username out for a full acknowledgement). It’s tough and I am feelin’ it since, judging by your paragraph above, you singled some of my recommendations out. Ultimately - it depends one what you are looking for. With Rock, especially of the era through the 70’s - it was so central to most folks’ upbringings and cultural identity that there is a lack of perspective - it was woven into our lives. So - as for Aerosmith, say, goes - do all four of their albums really need to make the cut? Nah - they do in my library because I can’t imagine hearing Toys in the Attic without access to Mama Kin or Train Kept a Rollin’ - but I acknowledge the lack of perspective on my part.
I agree with you about the Moody Blues, but really love most of Art’s other choices. Woodstockbirdybird has some great ones, too.
As for the Beatles - yes I agree not all of their stuff is essential. But in the classic “500 years from now” question, I can see their “canon” being one of the few bodies of work that is consistently regarded, dissected, explored and played in its entirety.
Derek & the Dominos
Iron Butterfly - In a gadda da vida? For the historical significance of the first (? I could be wrong?) super long drum solo.
I also vote for Led Zepplin’s Houses of the Holy, The Rolling Stones Let It Bleed, Moody Blues Days of Future Past, again, not sure, but weren’t they the first group to play with an orchestra?
Anyone mention Van Morrison yet? The album with Moondance on it.
Called, strangely enough, Moondance 
I would expect Astral Weeks would make the cut, too.
There will be a punk thread later on, but the early parts probably belong in this thread as well.
Woodstockbirdybird beat me to the puch with a few of his choices, but I’ll add a couple:
I’d argue that *The Velvet Underground and Nico * is the only one of the VU catalog that is essential. Also, I’d say the same about **Big Star’s ** Radio City.
Tough to narrow down my list as far a **Neil Young ** goes…I’ll go with Harvest and Rust Never Sleeps. I think some Neil fans may argue with that though.
Since we’re including early punk:
**The Ramones ** - Rocket To Russia
The Clash-The Clash
Regarding Yes, I think I’d go with Close To The Edge. For my money, that record has them at the top of their game, with their best lineup.
And since The Beatles have been much discussed in this thread…my picks would be Revolver, Sgt. Pepper’s, and Abbey Road. It’s tough to leave Rubber Soul off, but I think Revolver marks a giant step forward in their songwriting style and level of innovation. Their essential catalog should begin there.
Lastly, for the sake of discussion, I’d like to add Tom Waits. He’s one of my favorite artists, though I’m having a little trouble classifying any of his pre-80’s work as essential. I think I’ll suggest Blue Valentines, because it began to foreshadow some of his mid-80’s work that I do think is essential.
Just got around to viewing this thread and I must say that you are missing some very influential and important additions to the rock lexicon.
The greatest omission, in my opinion, is the combination (they are both obviously their own entities but they are linked by the fates of the 1965-1966 tour they made and the Basement Tapes) of Bob Dylan and the The Band.
Dylan cannot be left off of this list as he helped to define the genre of folk-rock and also because of the transition during 1965-1966 from pure folk to an electrified folk. Also, the Band were one of the great, unheralded rock bands of the 50’s (backing Hawkins), 60’s (on their own and backing Dylan), and the 70’s on their own.
It seems that all of you need to look beyond the obvious and stop the endless arguments regarding the Beatles, who may have revolutionized the world of pop music but did little to further the cause of rock music.
I was going to say that everyone was leaving out the “horn bands” until SkipMagic mentioned this. I would add Blood, Sweat and Tears.
There isn’t a whole lot I want to add, most of what is on this list is essentialish. There are a couple I noticed were missing though.
Bo Diddley- Rock and Roll owes more to this man than I think most people realize, check out the Chess Box.
T-Bone Walker- I was listening to an early recording today, and I don’t know if Chuck Berry was borrowing from him or the other way around…but he deserves to be on the list with Chuck and Bo. Check out Blues Masters: the very best of T Bone Walker
(I know many would catagorize these guys as blues, but there influence was so extream and the time lines overlap to the point that I think they should fall into the Rock catagory. These are the folks the Brits were lovingly stealing from after all. I will however be leaving Buddy Guy off the list as he leans just a bit too far the other way.)
I know they have been mentioned but I think that Cream deserves another nod as having the single greatest collection of musical talent any three piece band has ever seen.
I can’t believe no one mentioned The Animals yet, but The Zombies got a mention, so all is not lost.
The Who have also been mentioned, but not their amazing Live at Leeds album (get the 2 disc special edition, it has a live performance of Tommy as the second disc)
I am not going to touch the **Beatles **again except to say that they belong on this list and you all know it, so stop complaining. Same goes for the Stones.
And lastly **Warren Zevon **. Excitable boy is a good one, but I would say go for a compilation of some sort. I like the anthology I’ll Sleep When I’m Dead but YMMV.