Personally, I prefer in-ear headphones. I think the issue every has though is finding comfortable ones ... myself included.
That said, I find they do the best of blocking any noise as they seal the ear.
I've been using these for the past year:
http://www.amazon.com/gp/product/B00...qid=1261506638 and have been happy. For $30, and nothing special; I couldn't complain.
A few weeks ago, these were on uber-sale from Amazon (lasted about an hour)
http://www.amazon.com/Ultimate-Ears-.../dp/B0019RBJOE @ $99 so I scooped up a pair and love them. I don't feel like they isolate the noise any differently (slightly better with the included isolating adapter I guess), however the audio range is what makes me happy with them.
I've had a pair of Sennheiser HD600's for about 10 years (
http://www.amazon.com/Sennheiser-HD6.../dp/B00004SY4H) and find myself using the UE 10's at home now instead of them; to me the overall sound quality is better.
I've all but given up on big clunky headphones; especially when travelling. I used to travel with headphones that did active noise cancelling / had power packs / required batteries, but they were all too big for me. My under seat / floor storage is precious space and I don't want headphones taking up the space.