Better as in ultimate performance?
Water cooling, of course
There is no doubt that water cooling has the potential to remove more heat at lower noise levels than air cooling.
Better as in Bang for the Buck?
Air cooling, of course
The top air cooling solutions are competitive with (although they don't win they DO compete!) water cooling and can be done for less money most of the time.
As in reduced paranoia?
No clear winner in my mind:
cpu fan fails and you
can lose a chip in seconds
With water cooling- a failed pump will usually take at least minutes for a cpu to die- possibly hours. Failed radiator fans will usually take at least hours before enough heat to cause damage accrues.
Leaks are unlikely unless you make serious mistakes (or use a poly top water block) and even if you DO get water on components in your system it is unlikely to cause permanent damage. Not impossible but unlikely. The worst situation that could happen is a massive leak or tube blockage that prevents any coolant flow: this can kill a chip in seconds or minutes.
So to my mind water cooling adds more safety margin but also more possible points of failure.
Both take a lot of time and effort to really get right unless you get lucky- and getting an air cooled system to perform as well as a water cooled system at similar noise levels may take even more time (and money!) as just going with water cooling.
You may guess that I use both.....
I do prefer water cooling overall but the engineering elegance of a well done air cooling solution also appeals to me.