I'm trying to work out the general consensus on what's preferred here... Some shmups I've tried have had direct 1:1 finger-tracking, wherever you touch, the ship goes there. Cave's Dodonpachi titles on the other hand use a sort of offset system - a screen drag applies the equivalent direction to the ship, no matter where you touch (I quite like this method) Some games use tilt, which I personally don't like at all. Others use the virtual move-stick (usually bottom left) to apply a constant emulated analogue directional input. I can't think of any others but feel free to list more. What I really want to know though is what people like most in these types of games. Is it worth including multiple control options? is there a clear favorite to default to? It's a tricky balance between good control and not obscuring the screen with fingers and thumbs.
Dodonpachi and other cave shooters use 'relative touch'. That's the best in my view for shooters. If its normal touch then the ship will be hidden by your finger which is bad Dpads are good for platformers but for shooters it has to be relative touch. Cant stand tilt for shooters, veloci-spider was great on my icade with controls but with tilt ? Nahhh
You should also consider Space Tripper's touch method. For all the fuss Luke made to try and keep touch out, I think eventually what he came up with was pretty amazing, at least for Space Tripper. Don't think it'd work for a bullet hell though. I prefer tilt for that veloci-spider game and for Space Tripper on iPod. Space tripper on iPad i prefer touch
Bullet hell: Relative touch. Period. Other shmup styles: Relative touch is still usually a must for anything autoscrolling. Other control methods can work depending on genre, intensity, etc. Virtual stick for asteroid shooting, dual stick, etc. Tilt is usually a fail except for slow paced games, with very few hardcore games doing it well (Space tripper's tilt being the only recent example I can come up with). I don't see a point in direct touch if relative touch is there, but I guess some people prefer it, and it can work in vertical scrollers with a large player ship (no small hitbox), and not much action below the player. Neoteria recently went a very different style with up/down/fire buttons and it was surprisingly cool, though they've already backed off and added a 360 stick option...
Like psj stated; Relative Touch is the way to go. EDIT: Had no idea this was bumped... what the hell/