I prefer the paste type teflon pipe dope. As traper said, always avoid putting sealant on the first couple of threads of any fitting.
If you do choose to use teflon tape, always wrap it opposite the direction that the threads turn. This will prevent the tape from balling up when the fitting is installed.
And always TEAR the tape off when finished wrapping. NEVER cut the tape, as a cut edge will provide a leak path for the fluid.
NEVER use any type of sealant on an "O" ring. Those fittings are designed to seat an "O" ring directly to the metal. Adding a sealant will just provide a leak path later.
The same applies for tapered seat fittings. These are designed to seal metal to metal. A sealant or tape will just prevent the fitting to retain it's proper torque, and will loosen over time.
Remember in tapered pipe treads, a little sealant is good, a lot is worse than no sealant.