If you have paved surfaces, have a decent distance between stops, and minimal walking around off the bike once you get to your destination... I'd opt for pannier(s). However, if your route includes some singletrack, you are making several stops that are relatively close together or had to do some considerable amount of walking while keeping your bag(s) with you... backpack.

In truth, there is no right or wrong answer here. You will get all kinds of responses, whether it be panniers, backpack, mess bag, expanding trunk bag, folding baskets, Carradice type saddle bags, or even an odd nod to the all mighty milk crate.

I personally have hit upon the solution of using a backpack along with one or both of my old Nashbar Townie grocery panniers. Backpack can be shoved into the pannier for comfort or worn for maximum cargo capacity. The panniers fold up when not needed so that they aren't catching wind and a u-lock can be stuffed into one when folded, but they aren't the easiest to mount/remove (compared to Arkel and Ortlieb).