I use chips because they're readily available--especially in different different woods like pecan and apple. I've never seen pellets for sale anywhere.
But I really like to do is take some hickory logs (but other types would work as well) that are about the size of your wrist and 6 - 8 inches long and split them in quarters. Then I use one of those for a smoke. If I want more smoke, I'll supplement with some chips.
I've used pellets with good success in my MES. I bought a 25# bag of "Backwoods" hickory pellets at my local farm-and-home store when I saw a pallet of them while shopping for something else.
They must not be pure hickory, though, as I get a stronger, truer hickory taste from using chips. This is probably a function of the brand or manufacturer more than the fact that they are pellets. At least that's my theory having only used one brand.
The interesting thing is that they start smoking faster and then the smoke last longer between reloads. You do *not* soak pellets (some say you don't have to soak chips for use in an MES, but I get better results with soaked chips.)