Covers vs Originals
There's an ongoing debate about whether to do cover songs versus originals. What you choose depends on your band.
First of all, don't worry about playing covers, even though someone else "owns" the song. The music venues pay for the right to have you play "Freebird" as many times in a row as you want. Since you don't have to pay, play it all you want. See the Copyright Section of The Survival Guide for the details.
There are some "purists" who ask what reason there is to play covers at all. With the easy availability of CD's and MP3's, you could play the songs by the original groups all you wanted. The truth is, however, that people love live music (when it's played right.) And if your band is creative, you can put your own spin on the covers. You also don't have need to work as hard to prove yourself to your audience because they'll probably be familiar with the music.
If you play originals, and you are just establishing yourself, you should still play a mix of covers. Doing so will give your audience something to hook onto, in between the unfamiliar songs. You can do this until you get established, and your own originals become familiar. In that case, you'll be playing your older favorites as anchors for your fans as you introduce your new originals.