Frankly, I have yet to see the first installer that really allows both per-user and per-appmachine installations. Many installers offer this optionsoption in their GUI, but the setting only affects where the shortcuts etc. go -- the binaries always fo to %ProgramFiles%.
In fact, it is pretty hard to create Windows Installer packages that allow both kinds of installs, to say the least. With the advent of UAC, I'd say its is impossible: Per user installations must not require elevation, per machine installations have to. But whether an MSI package requires elevation is controlled via a bit in the summary information stream -- there is no way to have user input have impact on that.
Whether per-user or per-machine is the better choice greatly deoends on the application. For small packages, however, I tend to prefer per-user installations. Besides being slightly more user-friendly by not requiring an UAC prompt or runas, they also signalize the user that the setup will not do much harm to the computer (assuming he is a non-admin).