Most bicycle panniers work well for touring, but don’t meet the needs of people who use their bikes for commuting or shopping everyday. The typical pannier has a main compartment sealed with a zipper or flap, plus a few smaller pockets. The tourist packs it like a hiker would pack a backpack. However, these bags don’t easily hold the urban cyclists’ cargo of shopping bags, daypacks, and laptop computers. An open-topped pannier that works more like a basket than a backpack provides a better way of carrying this kind of gear. These large bags, usually called grocery bag panniers, or shopping panniers, allow you to carry all kinds of oddly-shaped loads and fold flat when not in use. The key to using shopping bag panniers is to keep your gear in a separate bag that you can drop into the pannier. Day packs or book bags work well. I’ve used dry bags when it rains, but have found that plastic garbage bags are easier and cheaper. Having an open-topped bag also gives you a quick place to toss your bike lock, and the convenient access makes it easier to shed clothing layers as you warm up.
Several companies make them. The Jandd grocery bag pannier seems to be the sturdiest, but is also the most expensive, at around US$45 for a single pannier. REI sells a similar, but less refined, bag for US$80 per pair. My favorites, which I use everyday, are the Nashbar Townie baskets, which cost US$17 each. Unlike the other grocery bag panniers, they don’t use a rectangular metal frame to reinforce the top of the bag. This means that they don’t hold their shape quite as well as the others, but it lets the opening at the top adjust to different shaped cargo, like a bulky laptop bag. They’re cheap enough that I leave them on the bike all the time, but they remove quickly enough that I can conveniently take one with me to carry stuff while the bike is parked.
For the true urban bike guerilla, Cobbworks* takes used 4-gallon food service containers and turns them into hard-shell, waterproof panniers. I rode with one of these before I got the Nashbar Townies. I prefer the Townies because they fold, and because they’re less bulky off the bike, but I miss being able to use the Cobbworks bucket as a stool when I have to fix a flat.
[*Unfortunately, Cobbworks' website is no longer active. If you're interested in tracking down a pair, try OlyBikes in Olympia, WA. -- SL]