There are really two different sub genre of steampunk literature.
There is the alternate history steampunk sub genre that is set in a historically based world(usually Victorian London). The technology or historical events have for some reason veered from the real timeline. The Difference Engine considered the first work of steampunk is an example of alternate history. It explores the question of what if their was an analog computer created in the 1800’s.
Steampunk Alternate History include The Strange Affair of Spring Heeled Jack and Boneshaker. While not neccisarily accurate these works of steampunk incorporate history places and figures. While in a story like Boneshaker Seattle is much bigger than it would have been in the time period covered it still provides and interesting look into a world that never was.
Steampunk fantasy is much like traditional fantasy novels but set in a steampunk world with steampunk technology.
Steampunk Fantasy would include The Court of the Air and Perdido Street Station. These take place in unique but somewhat familiar worlds. While generally employing multiple races and species they still have some feeling of a Victorian London Setting.
There are steampunk works that make it difficult to place a story in one category or the other. Whitechapel God’s is set in a London so bizarre that it might be difficult to consider it historical fiction. On the opposite side is a story like The Half Made World which is set in a fictional unfinished planet that is so similar to the American West that one might be tempted to think of it as historical fiction.
Which is Better?
Outright fantasy seems to be a generally more enjoyable read although well researched alternative history can be just as educational as a history book. It really comes down to the preference of the reader but it would be a safe bet that most are going to enjoy reading steampunk fantasy. It has consistently produced some of the best of what the genre has to offer. From China Mieville and Stephen Hunt it takes the traditional Lord of the Rings style fantasy and puts it in a new world.
An interesting way to look at steampunk fantasy is that it is expanding the use of technology of the 1800’s for much longer. The Sword and Shield era lasted much longer and made it so that a fantasy novel could be written about the time with little thought for historical accuracy. The steam revolution was a relatively brief time in human history and therefore is a difficult time period in which to squeeze the fantastical in. Steampunk set in a completely fantasy world allows the reader and author to explore the ‘what if’ the steam error extended for 1000 years.