Interesting question...
It needs to be a balance of both. You must set rules and be able to put your foot down, but you also want to be someone that your children know they can go to with problems and questions. Love your children with everything in you. Show them how much you love them, but don't let them walk all over you.
Nikki probably encapsulated our approach. I'll just mention/elaborate on a few more points:
1. Showing love is extremely important, physically and verbally and emotionally. Particularly in emphasizing unconditional love - we will love her no matter what, eg., even when she's naughty.
2. I believe in the importance of helping the child help herself, ie., not spoiling her. Loving your child doesn't mean doing everything for her - on the contrary.
3. Disciplining - I believe in setting ground rules and being strict, and I may even consider myself a disciplinarian. However, I do not believe it is EVER necessary to hit or spank. I also do not believe it is even necessary to scream and yell, or to even lose one's temper (though I know it can be very hard some times).
4. Communication is key. I would always explain to Felicity why she's not allowed to do this and that, why things have to be a certain way. Where possible, I would even let her make decisions for herself. After explaining choices and consequences to her, she would typically make the 'right' decision anyway.
To tie all the above together, even when disciplining and being strict, it can be done in a very loving way. Like I said, no screaming/yelling/beating is necessary. You just have to lay down the punishment or whatever, and explain why it is happening, that we love her, etc.