I do a bit of both. Tshirts usually flat, shorts/trousers rolled, dresses gently folded at the top of case just before closing lid.
My mum packs really strangly (or I think so anyway
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) but she lays her beach towels open and flat in the bottom of the case with the ends hanging over the edge of the case, she keeps most things on hangers (ie trousers, dresses, tidy tops) then places them in case with the hangers over the edges .... with me so far .... she then packs shorts, tshirts, shoes underwear and toiletries etc in the middle of case and then folds the clothes with hangers and the towels over it all in like a big parcel. Mum says that nothing gets creased and everything is ready to put away once she reaches her destination.