The directions often say to wrap plumber's putty around the underside of the faucet, and one plumber I worked with packs the entire area of the underside of the faucet with putty.
Since faucets generally come with a plastic seal to block water from leaking below, I don't see the need to use putty. I use the clear silicone that Rugged mentioned, but only if the plastic seal isn't working.