If you are talking about the portion from the counter to the underside of the upper cabinets, I would tile all the way up. I mounted my simple paper towel rack on the underside of the cabinet. I have a hook for cloth towels on the side of the upper cabinet by the sink.

I would tile all the way up as well. Gives a great look. Check out tiledaily.com for some great backsplash choices.

I agree and would definitely tile all the way from the countertops to the bottom of the upper cabinets. It really finishes off the kitchen nicely. As houssaon said, you can mount a paper towel rack under the upper cabinet. You could even get a standing paper towel rack that you set on the countertop.

Thank you to the 3 of you who answered. I am definitely tiling all the way to the cabinets.