In most high-availability scenarios, dialer watch is the mechanism of choice for dial backup of permanent links, with dial-on-demand routing a close second. Backup interface is commonly used only to back up simple point-to-point links or where its unique other features, such as load augmentation, are required. The optimal approach strongly depends on the network architecture, user requirements, and typical and worst case traffic flows. It should also be noted that with enough skill and attention to detail, any of the three mechanisms can be configured to work well in most applications.
Chapter 4 of High Availability Networking with Cisco (Addison-Wesley, 2001, ISBN 0-201-70455-2) discusses all three approaches in greater detail and provides examples of each. Chapter 5 then looks at solutions for some specific needs, including the use of dial-on-demand routing to provide all the capabilities of dialer watch.