Tradition and the building code have always said that a vapour barrier (properly called a vapour retarder) should be placed on the warm side of the insulation. This is actually an oversimplification of the scientific reasoning on the placement of a vapour barrier. With modern, energy-efficient, well-insulated houses, building inspectors are permitting reasonable variations on this rule.
Theoretically, the vapour barrier should be placed on the warm side of the dew point on the coldest day of winter. The objective is to prevent the vapour barrier from getting cold enough to allow condensation on its own surface much of the time.
As a rule of thumb for all regions except the Far North of Canada, leave two-thirds of the insulation on the cold side of the vapour barrier. This allows double-wall and strap-wall construction to place the vapour barrier at least 2-1/2 inches inside of the drywall, allowing electrical and plumbing runs on the warm side of the vapour barrier and few or no holes through it. Neither the electrician, the plumber, nor the drywall installer will damage the vapour barrier while working, ensuring that the polyethylene sheet remains a perfect air barrier, which is what we want it to be.
Three additional points about vapour barriers: never place it on the outside of the insulation where it will trap moisture inside the wall; never install two vapour barriers or you will trap moisture between them; and leave no air space between the vapour barrier and the insulation.
Look up VAPOUR BARRIERS for lots more details.