I rode with a backpack for a while when I first started commuting. I used the same Osprey Radial as GeneO above, but in the 34 liter size. I loved that pack for commuting. It was bright, came with a raincover, and because of the mesh back panel and rigid frame it was very comfortable. I would recommend it to anyone looking for a good commuting backpack.

Then one day I got hit by a car on campus. After I recovered I quickly found out that my back couldn't handle the weight anymore, and I started looking for pannier options. I first tried the Banjo Brothers Backpack/Pannier. It was good for the cost, but the little hook that it attaches to at the base of the rack wore a hole in mine after about a year of use. Now I'm using the Arkel Bug Backpack/Pannier, and for the added cost it is a MUCH better bag. It has better organization, better water bottle pockets, and a helmet holding pocket for off the bike use.

So those are my recommendations for each style.