I like and use the approach described by Henrik Kniberg in Version Control for Multiple Agile Teams. Henrik did a great job at explaining how to handle version control in an agile environment with multiple teams (works for single team in traditional environments too) and there is no point at paraphrasing him so I'll just post the "cheat sheet" (which is self explaining) below:
I like it because:
- It is simple: you can get it from the picture.
- It works (and scales) well without too much merge and conflict troubles.
- You can release "working software" at any time (in the spirit of agile).
And just in case it wasn't explicit enough: development is done in "work branch(es)", the trunk is used for DONE (releasable) code. Check Version Control for Multiple Agile Teams for all the details.