There are actually three options.
Dual boot with Boot Camp.
VM using Parallels, VMware or VirtualBox.
VM using Parallels or VMware running the Boot Camp Windows installation.
The third gives you the advantages of the first two, i.e. you can make the decision which option to use every day or hour whenever you want. The second option also has three sub-options: you can run Windows fullscreen, in a window, or combined with Mac OS.
Now, generally the first option is ideal when
a) You really want to use Windows, not Mac OS, but thought that Mac hardware is nice and that Mac OS is a good extra.
b) You really want to use Windows sometimes.
c) You want to run games or other programs that want direct hardware access via the OS only.
d) You fear that system resources are not enough to run both Mac OS and Windows at the same time.
The second option is ideal under these circumstances:
a) You really want to use Mac OS all the time and only need Windows sometimes.
b) Or for specific applications occasionally.
c) Or for specific applications all the time (for example Microsoft Access or some such Windows-only application).
For all three running Windows in fullscreen mode will work, for a) and c) running Windows in a window is good too, and for c) running Windows in combined mode (called "Coherence" or some such thing depending on VM product) can be quite good*.
(*I run Powershell a lot because I use it at work and need to study all the time and Powershell is the only Windows program I run all the time. Hence I like the fact that using Parallels it is the only Windows window I see on my desktop.)
The third option is ideal if you really want two computers in one, leading to combinations of all reasons above. I use Windows 7 and Lion with Boot Camp and Parallels myself.
Hope this helps.