I do a bit of both. I have a lot of experience with improv so I tend to fall back on that given the opportunity. I find it keeps me able to adapt better to the PCs and not become too tied to certain concepts. I also have a few random generators I've put together for magic items or encounters or whatnot just so I can keep the world feeling alive or even just a little more mysterious (I'm looking at you, plush spike of comfort).

However, when it comes to the bedrock of the world, I do a lot of planning. Names, locations, dungeons, maps, maps, maps, calendars, weather, moon phases even. Just last week one of my players wanted a run down on major gods in my world's pantheon and I had a three page summary of most of the major religions that exist in my world with promises of more one I complete each area.

Let me give you an example. The party is currently traveling through the kingdom of Aramal, a hostile and mountainous land with hot summers and frigid winters, all so that they can locate a holy relic that's been stolen from a god. Aramal has been in production for about 8 years and I've spent countless hours trying to figure out how it works (And I wasn't even half-done when the campaign started). I've been updating and adding to it between sessions in order to keep the place feel real. However, one of the big things about Aramal is that there are very few settlements because of a variety of local factors, namely climate and fauna. So if the party spends the week on the road and isn't being attacked by blood thirsty creatures, there's a disconnect. So I use random encounters and mix them in between established encounters I want to run for them. They're usually nothing major and rarely have lasted more than 2 rounds, but some of them have been more memorable than the prebuilt encounters (my favorite being the monk putting a troll in a headlock as it tries to climb out of a hole all while the wizard spams firebolt into its face). These random scenarios have, I think, done a good job of making Aramal feel exactly as it is supposed to.

Basically, my strategy is this. If it's something that is established and will have a huge impact on the entire world I've created, I plan it out. If it's something small and localized that may be a fun scenario for the moment, I don't give it much planning. It's not a hard rule, but it's been working for me.