Peter-
Tomcat's catalina.sh says:
# CATALINA_OPTS (Optional) Java runtime options used when the "start",
# "run" or "debug" command is executed.
# Include here and not in JAVA_OPTS all options, that should
# only be used by Tomcat itself, not by the stop process,
# the version command etc.
# Examples are heap size, GC logging, JMX ports etc.
# JAVA_OPTS (Optional) Java runtime options used when any command
# is executed.
# Include here and not in CATALINA_OPTS all options, that
# should be used by Tomcat and also by the stop process,
# the version command etc.
# Most options should go into CATALINA_OPTS.
Based on that, I'd say using CATALINA_OPTS is probably the better practice for options related to starting Tomcat, but either should work most of the time. There are probably other Java tools that look for JAVA_OPTS (e.g., Maven might do this), so there might be some cases where JAVA_OPTS works but CATALINA_OPTS would only work for Tomcat.
-Esmé
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