SENTRY GUN!
Oh, wait...
Depends on the level. I have a hard time deciding between jarate and SMG.
...
I'll take the SMG when ... I can't trust my teammates.
This is pretty close to my philosophy. On the rare occasions that my finger slips and, instead of picking Engineer as I intended, I end up as a Sniper, I have to choose between SMG and Jarate. Mainly because I burned all my Razorbacks in an attempt to get a gold wrench, but also because I, personally, haven't found it as magical as others.
Jarate is nice... if you are a team player. If I'm sniping with the sniper rifle in the crooked hallway of Turbine, or some other place that is both (1) prone to rushes by the enemy and (2) generally full of teammates, I'll fling the gold with everyone else. Short of perhaps an Ubercharge or a surprise sentry, or a really kick-butt spy, nothing breaks up and discordinates a rush like being drenched in pee.
However, as Engineer, I've come to really, really love my pistol. It's not incredibly powerful, but I get a not-insignificant portion of my kills, assists, and serious bloodletting from the pistol. The speed of fire, and accuracy when fired non-automatically is hard to beat; unless I've got a guaranteed chest shot I'll pick pistol over shotgun any day. I can land more "pellets" on a zippy scout or slinky spah with the pistol than from a shotgun cartridge.
Why am I talking about Engineer instead of Sniper? Isn't it obvious?
...
Their strengths and weaknesses, when I play them, are similar, except that the Sniper doesn't have a sentry gun. A weakness I await a fix for.
In both cases, I've got an extremely powerful main weapon which devastates the enemy... IF I hit that enemy just right. An off-center shotgun blast in video games aren't as useful as they are in the real world. In the real world you can take off an arm, or hobble the guy, or at least significantly distract him. In video games you just do less damage. Same with the sniper rifle. Slow load time means that any missed bullets are totally wasted and even hit bullets are expensive.
However, the SMG is a fully automatic pistol. You can fire single bullets with the same accuracy as the pistol. The main difference is you don't sprain your index finger. You can also direct the damage better; a flying scout can miss a large chunk of my shotty spray, but with proper lead (and a little luck) I can sink in every single bullet for full effect.
I've come to depend on my SMG and Pistol.
When I'm out with the Huntsman, things are pretty much the same. In a short map, like Turbine, I'm likely to carry Jarate, as it's highly likely I'll be near teammates AND assisting in a rush in Jarate range. On longer maps, though, I prefer my SMG. When the entire team is stretched out running to an objective, I prefer having my Fire Huntsman -> Switch SMG -> Finish off defense instead of depending on my teammates.
And that rolls back around to the quote above, which is QFT: I'm more likely to carry Jarate if I trust my teammates to assist me when I'm in trouble. In all other cases, I prefer the extra bullets of the SMG over hoping they find being splattered with liquid waste repulsive enough to go away.