Two of my favourites would be "Living In Another World" by Talk Talk, which features a Hammond solo from Steve Winwood, and "Beat It" by Michael Jackson, which had guitar from Eddie Van Halen. I love all four of those artists and their collaborations worked really well.

One collab that should have been epic but in my opinion is not that great is "Under Pressure" by Queen and David Bowie. I've always thought it was sort of a dull song and should have been better considering how legendary the people who made it are.

Do you think collaborations tend to be better when the artists are pretty different, but still somewhat similar in spirit, rather than being very similar like Queen and Bowie are?

The 1985 song Nikita by Elton John features background vocals by George Michael (and also electric guitar by Nik Kershaw).  George's appearance at the end has always been my favourite part of the song!
http://www.youtube.com/watch?v=UXLomhgBjx4

In 1986, Elton returned the favour by playing piano on The Edge of Heaven by Wham!  The opening piano bit makes the song instantly recognizable ...
http://www.youtube.com/watch?v=cCqEyJc-wdk

The Traveling Wilburys.

George Harrison, Roy Orbison, Tom Petty, Bob Dylan, and Jeff Lynne (from ELO).

http://www.youtube.com/watch?v=L8s9dmuAKvU

That's about as epic as it gets.  ;)

I Feel for You, written by Prince, sung by Chaka Khan, with harmonica from Stevie Wonder, and rap by Melle Mel.

How about Rockwells Somebody's Watching Me with Michael Jackson doing back ground vocals. I always liked that song.

Then of course there was Michael J and Paul McCartney doing Say Say Say, another favorite of mine.

Always loved this

http://www.youtube.com/watch?v=xGbnua2kSa8