There's really no right or wrong on that one. It depends entirely on how long you expect the vanity to be in place, whether you might replace it with a smaller one if neccesary, and whether you're willing to settle for a not-so-perfect match later if you have to put down more tile. For the small area that the vanity covers, I'd put the tile down and then sit the vanity right on it, much like the toilet will sit...right on the tile.
[This message has been edited by treebeard (edited January 17, 2003).]
You save a little material by tiling around it, but it takes more time and cutting. You can compromize and put just enough tile down to cover the footprint of the vanity, this is the quickest easiest without seemingly wasting a lot of material.