Both! Characters are 2-D, backgrounds are painted, and the effects are 3-D eg.the scene's realistic movementsyea, the entire scene moves as the character executes it's own movement like in the Sword of the stranger~
at first I couldnt stand 3D... stuff like Toy Story amazed me, but shows like ReBoot (anyone remember that one?) and the 3D Voltron show looked bad imo back then. Over the years 3D animation has come a long way, I wouldnt mind seeing a mix of both as long as the style fit the movie
2d really..3d is ok, but the realism of the characters and movement limitations make them boring, especially if there's too many of em..(and more cartoonish are makes them look very ugly- flushed away, anybody?)
i miss good old 2d animations , with or without 3d elements, though i preffer without because they really look out-of-place.
the possiblilies of expression in 2d beats 3d anyday..