Both, depending. I always buy puffies sized to go over all other layers—imo its simply wrong approach to get a puffy sized so small that you cant pull it on over all other layers—thats the entire point of a puffy to me. But I also frequently will wear one under a shell. Depends on situation.
If Im adding a puffy to stay warm while stopped during stop-and-go activities, then it almost always goes outside.
If Im using a lighter puffy as a packable midlayer for cold conditions and I’ll be wearing it for longer periods of time, then often under.
Yes, it insulates better when under, but it still insulates well when over. My decision is a balance of performance and convenience depending on conditions and situation.