This article is from the Macintosh system software FAQ, by Elliotte Harold firstname.lastname@example.org with numerous contributions by others.
If you're using System 7.1 or later the answer is simple:
Put all fonts (Truetype, PostScript outline, QuickDraw GX and bitmap)
in the Fonts folder inside the System Folder. You can put them other
places (the Extensions folder, the System Folder itself, the system file)
but there's no good reason to do so. In particular storing fonts in the
system file unnecessarily is a common cause of system file corruption
and all sorts of hard to diagnose problems. When you upgrade to
System 7.1 or later, be sure to remove all fonts from the system file.
If you're using a system older than 7.1, TrueType fonts and
bitmaps belong in your System file. In System 7.0 and 7.0.1
PostScript outline fonts go in the Extensions folder. In System 6
PostScript outline fonts belong in the System Folder.
Many older versions of font and printer utilities like ATM
and SendPS cannot find fonts placed in System 7.1's Fonts folder.
Most of these utilities will work if you put your printer fonts
in the Extensions folder or System folder instead. However in
all cases I'm aware of upgrades to these utilities that work
with the Fonts folder are either cheap (under $10) or free.