The answer depends entirely on what you need your storage to do.
Will you ever connect more than one XenServer to your storage? If so, local is not a good option.
What is your price point? SAN/NAS are more expensive than local, and if you have a small budget you may be able to afford the disks only as a dumb DAS or internal storage.
Do you need "SAN" features, such as thin provisioning, deduplication, snapshot copies? Are you willing to pay extra for them?
Additionally if you go for shared storage (NAS or SAN) you need to decide on which protocol you are going to use to access the storage. NFS, iSCSI, FCP, etc. There are advantages and disadvantages to running NFS vs iSCSI in XenServer. It really depends on what your needs are.
Also remember that XenServer's local storage is limited to LVM over iSCSI Storage Repository types. This is a thick provisioned SR, so you are going to be forced to use thick provisioning for your storage. I am nearly positive that in XenServer there is no way to do thin provisioning without using NFS (which requires shared storage such as a NAS or SAN).