From what I think....
1) Best for battery life probably is off and have it very low.
2) Best for looking at the gorgeous screen is to have it off and somewhere close to 50% brightness.
3) Best compromise might be setting it to 50% or just under and turn auto brightness on.
I go with #2 because the iPhone 4 battery life is very good and I love to see see the high quality screen in all its colorful goodness. 😀 Since it's hard to give an exact percentage of brightness I'll say that mine is set between the two letters in Auto-Brightness.
If I'm wrong then it's ok with me because I'm happy with how things are going so far.