I was reminded of the downside of unshielded cables by Peter from Double Helix when I was toying with the idea of making a DYI braided cable.
Getting a small signal from an amp to a set of headphones via unshielded cable is just asking for trouble. RFI, EMI and other junk that is collected through the power grid/the home's electrical wiring system, and interference from other audio equipment can ruin a system. You add a 10 foot run of unshielded headphone cable to that equation and the whole rig could just become a large antennae. Result? Muddy sound, grey sound, buzz, to name a few symptoms.
I've had trouble before with unshielded interconnects. Some equipment is OK when hooked up with unshielded cables, but other gear can be a real pain, with annoying hum coming through the speakers (and headphones, I imagine, as well).
The other side of the argument states that the shielding itself can cause a different set of woes, sonically at least. (interfering with the flow, so to speak) Perhaps some PVC insulation and braiding is enough.
I'm still in the market for the headphone cable, so I am unbiased when I say that the effort and method that Double Helix use to insulate their cables looks impressive. I think that Tara Labs use a similar idea in their hyper-expensive, top-of-the-line cables. What is the Silver Dragon design like in this area - V3 users like to comment?