Just below the surface. You want to attract bait fish and they hang out on the top of the water column. the light draws in the bait and they bring in the predator fish.
I have used both drop and spot lights and both have their advantage. I would say with personal experience that green drop lights are the best and a good LED spot lamp to shine down on the water and provide heat which brings in more bait.
USAF Retired and Fishing!