Natural SEO is clearly better! PPC does of course work, and in most cases it works very well. However, many people see the "sponsored links" in SERP's as tainted by advertising and will usually ignore them and click on the first set of natural links above the fold (top 5 natural results on page).
A combination of Organic SEO and PPC is a great tactic to make sure you are maximizing your chances of getting that all important click through from your target audience. PPC is very useful for getting targeted traffic for your long tail keywords / phrases, seems these are far more targeted and usually cost much less per click..
Given the choice of having EITHER a paid listing on page one of results or naturally being above the fold from search engine optimisation, i would choose to be in the natural results over the paid listings every time.