Which is the best way to locate an element?

We choose the method based on which gives the element in fastest way in all the browsers. Finding elements by ID is usually going to be the fastest option, because at its root, it eventually calls down to document.getElementById(), which is optimized by many browsers.
Finding elements by XPath is useful for finding elements using very complex selectors, and is the most flexible selection strategy, but it has the potential to be very slow, particularly in IE. In IE 6, 7, or 8, finding by XPath can be an order of magnitude slower than doing the same in Firefox. IE provides no native XPath-over-HTML solution, so the project must use a JavaScript XPath implementation, and the JavaScript engine in legacy versions of IE really is that much slower.
If you have a need to find an element using a complex selector, I usually recommend using CSS Selectors, if possible. It's not quite as flexible as XPath, but will cover many of the same cases, without exhibiting the extreme performance penalty on IE that XPath can.