Well, we had a big discussion about that and the contractor and cabinet guy had different ideas. Ultimately we ended installing the tile after the cabinets were in. We liked that the tile would be grouted around the base of the cabinets so that liquids could not seep underneath. But now we have a small problem....we did tile under the dishwasher which made it about 1/4" higher than the cabinets. The dishwasher has adjustable legs but they just wouldn't go down low enough. So we have to make some adjustments now before we get our countertop placed. I think they are going to put some kind of a filler in so that everything is level. Anyway, moral of the story is....make sure you know how much you appliances can be adjusted if you tile under them but not the cabinets ;)

I'm not sure what the correct way is, but I wish I would have put tile under my cabinets. Here's why - 20 years ago when we built I loved my kitchen design - now in 2010 not so much. However, my tile runs everywhere (except under my cabs)- kitchen, laundry, guest bath, entry, dinette & sunroom. So, I'm pretty much stuck using the same footprint for my kitchen remodel or else I would eat up my budget on just flooring.