I use a backpack to carry my stuff when I'm commuting. I have lights on the bicycle itself, and a small one attached to my backpack too. I've also got reflective stuff on my backpack.
As for panniers, I've got mine set up on my touring bicycle so that the lights shine in between the panniers and the wheel. I also tuck a couple lights into the mesh bottle holder at the back of the pannier, and I've got a light right at the back of my rack.