I first learned it as one of those things attributed to Picasso that he probably didn't really say.
Talent imitates. Genius steals.
Nancy Prager does some detective work and finds out the real story of this comment. She traces it to T. S. Eliot.
One of the surest tests [of the superiority or inferiority of a poet] is the way in which a poet borrows. Immature poets imitate; mature poets steal; bad poets deface what they take, and good poets make it into something better, or at least something different. The good poet welds his theft into a whole of feeling which is unique, utterly different than that from which it is torn; the bad poet throws it into something which has no cohesion. A good poet will usually borrow from authors remote in time, or alien in language, or diverse in interest.
That nicely sharpens the sentiment that I always took to be lurking in the bogus Picasso version: the best way to steal is to do it so gracefully that nobody could tell that you've done it.