Both, depending on the circumstances. Tend to favor some sort of battlefield diagram - from a Dwarven Forge complex to a battlemat to a small drawn map we can use for reference, for most set piece battles, especially those involving several opponents. Theater of the mind works well for some combats, too. Things like simple beast encounters, strange terrain that is hard to translate to the tabletop, etc.
I spent nearly 20 years roleplaying without a mat (1980 til 3E) and while there were many great stories in that time, I found the clarity a mat to be help reduce confusion in battle ("But I teleported behind the necromancer!") for both player and DM. It was definitely an improvement in play.