Probably both. I've measured my penis from the top (the way it's supposed to be done), then measure my penis infront of a mirror, assuming how it'd be measured from a girl's point of view. I definitely got a larger number from the girl's point of view. Also, most girls just suck at estimating anyway and most guys lie, so that twists things. I'd say most penises are perceived as being an inch longer than they actually are and the bigger (or smaller) they become, the more exagerated the number will be. This is why you have girls saying that theyve slept with men who have 9, 10, 11, 12 inch dicks (a FOOT long, LOL).
I think any large guy can vouch for the fact that their inch guesstimates by women are often if not always much bigger than they really are. Some guy here said he is 7 1/4" measured correctly (this is really big, considered average in this way of measurement is between 5 and 6) but girls always put him at "9 inches".