A combination of the two. One of the better programs for basic heraldry is this one:
http://inkwellideas.com/coat_of_arms/We've standardized on that one for the roll-of-arms on the website. What it doesn't do, and I really wish it did, is sections other than straight lines... such as embattled, wavy, and so on. Blazon95 does those, but it's really terrible in other ways.
So usually I'll start with COA Design Studio, and then do whatever alterations are needed in Photoshop.