It's 50/50 how most people do it. A lot who do all-grain brews use software to calculate boil-off & grain absorption amounts, then adjust how much water they initially use before starting the boil (hence, no need to top-off after you're done). Personally, with my 5-gallon batches, I start with 3 to 3.5 gallons in the boil, transfer to my bottling bucket which has gallon markings on the side, and top off with bottled drinking water (i.e. the large 2.5 gallon jugs) until I have 5 gallons.
I should note that if you use bottled/processed water, don't use distilled. Standard drinking water has minerals that help out in the fermentation process, while distilled is a bit too "clean". It won't hurt the brew to use distilled, but it could affect the flavor from what I've read.