Thank you for this really interesting question - it is one of the questions that can make a big difference in your playing.
The sound you will use when practicing depends on the technique you are practicing at that specific time. The basic rule is this: Practice using the sound you will be performing this technique with. For example, if you're practicing legato ( hammer-ons and pull-offs), then you should only practice using a sound with at least a bit of gain - but if you're practicing eg. chordal picking, then you should use a clean sound.
Here’s a short list of most of the guitar techniques and the respective sound you should be using when practicing them.
Alternate picking & Sweep picking - try it both ways - use both Clean and Gain
Legato - Practice with Gain
String Skipping & Wide Stretches - Practice with Gain
Chordal & Crosspicking - Clean sound
Scales & Chords - Clean Sound
Here’s a Youtube video from my “Ask the Guitar Coach” podcast that answers in more detail this specific question. If you found this answer useful, you may want to check out my “Ask the Guitar Coach” iTunes podcast, where i answer listener/viewer questions about learning to play the guitar - available also on Youtube Playlist
Ioannis Anastassakis (program director of Elite Guitar Coaching), is a professional guitar coach, music educator, and music producer. He is a top 1% graduate of Musicians’ Institute (GIT), holds an MA in Guitar Performance, has authored 5 guitar instructional books (published & distributed worldwide by Mel Bay Publications) and has released 5 Instrumental CDs and 4 DVDs.
His sponsors include Ibanez guitars, T-Rex effect pedals, Schecter guitars, EMG pickups, Elixir strings, Roland multi-effects, Line6 amplifiers and Visual Sound effect pedals.