The usual way is the first way you mention, which is what they call "z-level profiling." The profile is completed in the increments specified in the program.
The second one you mentioned is usually called "spiral profiling" or "helical profiling." Maybe not as common since not many basic CAM packages support it.
I don't know if there's a distinct advantage to either other than with the second, the tool doesn't retract until the end, which may mean a faster cycle time. It also avoids "plunging" which may be necessary depending on the tool you're using (non-centercutting.)
If you're cutting material that can easily chip on both sides, I'd be inclined to used the first method, with a compression spiral with an upcut length shorter than your DOC, since the second method could lead to tearout.
For machining holes where the diameter is less than twice (and preferably 1-1/2 times the bit diameter) I'll "helix" in; this is usually faster than pocketing.