I myself do not have a problem with this - AS LONG AS I CAN TELL WHAT THE MODEL IS SUPPOSED TO BE. If you have a Vanilla Codex Marine that is painted blue and you are running them as Blood Angels, as long as the guy is holding the right weapon and I can tell what he is supposed to be, bring it. But if you are running a Wood Elf riding a Cold One wielding an Eldar blaster backed up by a Stegadon with a Warp Portal on its back and these are supposed to be Tyranids, I am not going to play you - if it is a tournament and I have to play you, I am going to be one unhappy camper.
Another thing that comes up from time to time is heavily converted armies. A really good example of this is Jester's Imperial Guard. He has modeled them up as traitor guard. Every model in the army has had some work done to it to make it different from a standard guard army. The big thing is - everything is WYIWYG. You can look at the army and tell what everything is at just a glance. This is what makes a good converted army. Another good example is the mechanical Tyranid army that you see pop up on the net every so often - the bugs have all been heavily converted, but you still know what they are.
|We're Space Marines - I promise!|
The last thing you are likely to run into is a proxy. A Proxy can be anything from a coke-can-carnifex to a half assembled greater daemon that is really a Dreadnought. This usually comes up in friendly game and isn't that big of a deal. You usually know the guy you are playing against and they just aren't finished with all of their army yet. I am okay with this for friendly games and small local tournaments where everyone knows each other, but at bigger events I am not a fan of a proxy model - or especially of a whole proxy army. WYSIWYG is king at tournaments.