My opinion: I'v used both configurations.

Panniers and racks are good when:

1. You use a touring bike or a relatively old MTB with eyelets for rack installation
2. You travelling relatively light, with no camping gear.
3. You ride on good quality roads. Off road riding can be very hard on panniers and racks.

Trailers have some additional advantages:

1. They fit every bike, even modern full-suspension bikes.
2. They are more robust, so you don't have to worry about tiny bits breaking off on harsh terrain.
3. They can let you use your backpack, so you have more options on your trip (and you don't have to buy 2 new pairs of panniers)

I've used this Scottland made trailer: http://www.carryfreedom.com/Y-Frame.html.

It's a two-wheel trailer, unlike the popular BOB Yak. This is a disadvantage on harsh terrain, because it can flip over, but on good quality gravel roads or paved roads, it's awsome. It's foldable, so you can easily store it and haul it by car or bus, and the construction is very high quality.

Oren