Either way is acceptable. I find that if I'm doing hyperextensions with a bar on my back I keep an arch. With these you'll tend to feel them more in your hip extensors. A lower pad position is useful here. Hold the bar in a power squat position to keep it from rolling off your shoulders.
When I hold a weight in front of me, or use my body weight I'll round my lower back; this obviously works the erectors more.
If you're looking specifically to work the erectors, position the pad so that you cannot bend at the hips, and can only flex your spine.
Some people think that movements with a rounded back are bad, and they can be, but you just have to be careful and not over do it. Pick a load that you can do for a few more reps than the range you're working and keep the reps under control.
With any hyperextension or back raise, do not actually hyperextend your back; only raise until your upper body is in line with your lower body. You can also try doing reps continuously, stopping slightly before the aforemented position; this works best with a 45* back raise.
This is one of the best movements to work the posterior chain and one of my favorite movements, so I hope I've given you some good tips.