I wasn't sure about which side out myself at first, but after asking around and researching, the most common side out by a LARGE margin is the smooth side.

My initial thinking was that the rough side would hold the compounds better. But, the more I thought about it, the more it makes sense to have the smooth side out.

The Smooth side holds the compounds just fine. In most cases with most compounds, you can just color on the compounds like with a crayon.

However, some of the compounds have a harder wax base. Some people will heat up the smooth side of the leather with a hair dryer which helps open the leather poors and melt the compounds into the leather at the same time.

If you feel the smooth side is just to hard or something, you can "lightly" sand the smooth side to soften it a bit. But, I would use a fine grit like 320 or so... actually, "I" wouldn't sand the smooth side, but I have read where some people have (????)

In the end the smoother side of the leather give a more uniform strop. Ideally, you want a smooth flat surface and let the compounds do the work. Although, believe it or not, the leather itself can polish some types of steel to some degree.

All of the old leather razor strops are VERY smooth.

Another tip I have come across and some may have heard about stropping on card-board. With some steels, I have had great luck stropping on coarse cardboard and similar coarse paper. I prefer the coarse paper on a flat surface. I don't like the bumpy corrugations on cardboard.

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