Teaching by Example = Learning by Example

I've found one of the best ways my kids learn is by example. Young kids often learn by mimicking others. My son is the best "cleaner uper" in his day care class and I know it's because his first day care provider set such a good example and he copied her (and the Barney song helps too). I've tried my best to use good manners especially around my children- and my daughter (on most occasions) uses her good manners. Every day and often without even realizing it, we're teaching our children with our words and actions.
Recently, I spoke with my best friend and it reminded me of a scene she described to me a few months ago. My friend had been grocery shopping and was getting her kids back into their car seats. A woman in the next parking space was doing the same routine with her two kids. One of the woman's kids was misbehaving and hit her brother. The woman responded by telling her daughter, "don't you hit" while at the same time spanking her kid. Now regardless of how you feel about corporal punishment-how can you possibly teach NOT hitting with hitting?

Do you think that child learned not to hit? That is definitely a situation that calls for teaching by example.