Airlines publish rules, but then there's reality....
A packaged bike is cumbersome and awkward to handle, so I usually pad the frame with lagging, remove pedals etc but keep it as a rolling bike, with the bag strapped on the rack, until I arrive at the special luggage check-in. (A bike is, of course, too big to go on the conveyor at the regular baggage check-in).
At that point I ask the baggage person if they'd like it bagged or not. Every time so far, in a dozen flights or so, they've said no - it's far easier for them to roll the bike than have to carry it or put it on a trolley. I think it's far less likely to be damaged if it's rolled and treated like a bike, too, rather than being lumped about like a particularly awkward piece of regular luggage. If they were to say yes, then of course I'd slip it into the bag and tape it up.
There's no real need to deflate tyres; if the tyres are flat, there's more danger of rims being damaged from the bike being dropped onto the wheels. If someone insists they be deflated, let out the minimum amount of air you can get away with.
It may also be worth removing the rear derailleur; otherwise if the bike's dropped on its right side or has other luggage stacked on top of it, the hanger can get bent.
The only advantage of bagging a bike that I've seen is that people can't resist fiddling with STI or ergo brake levers - I've seen bystanders and baggage handles do just that on my bike. If the bike's bagged, they can't easily do that....
