what is the best way of motivating people in your team ? is it through incentives or leading by examples ?

Simply both are important : Incentives: make the people satisfying to his package ONLY.
While Leading by example; Its type of continous education, ( Profession SATISFACTION), so both are important.

This best way to motivate is always through good leadership.
If you are a good leader you inspire your workers and they develop an intrinsic motivation.
When a person is intrinsically motivated there is nothing that will keep them from giving you all they got because they believe in you, the company, and the mission.
There is nothing wrong with giving incentives in fact they work very well to promote desirable behaviors.
The problem is that something behaviorism become linked to the reward.
As long as the reward is in place you will have the desired behavior.
Your employees become conditioned to expect incentives.
Ex: There was a company who gave wonderful incentives.
If there employee far exceeded production levels there names were put into a raffle.
As a result they would win things like cars, vacations, electronics, etc....
However, there came a period when due to market pressures the company had to make cutbacks.
The first thing to go were the incentives.
Needless to say production went down.
A lot of employees felt slightly dejected.
They felt as if they had lost something.
They had become conditioned to believe that the benefit of production was an amazing reward.
With the stimulus gone they somehow lost the desire to make production.
What happens if or when those incentives dry up? You still want your employees to do their best.

In my experience in development sector during Flood Emergencies, I have found LEADING BY EXAMPLE is a best practice for the motivation of team members.
I have found the same practice equally perfect in Education and Online Retail Sector.
The behind reason was development of close rapport and caring attitude towards your team members and make them ready for upcoming contexts and roles which will be obviously paid off better.

First of all we must highlight very important thing " That you don't Motivate people from the scratch " Here is a primary principle :- we all already motivated , So you can't motivate people they already motivated , You Just draw and show directions to their self motivation ...
For the other half of the question it's not only about incentives and leading by examples , Not everything motivate us is MONEY , If you mean intangible kinds of incentive it's OK and for me i think it's both " Incentives & Leading by examples " both going to foster the motivations in your team and enhance their capability for more productive ....

You can do these things:-1-Spend some quality time: - You need to get to know each member of your team better and they need to get to know you.
This will help you build a positive relationship with each team member.
You'll gain a much better understanding of them and how they're handling the job.2-Give feedback and coach: - You need to regularly tell each member of your team when they're doing well and when not so well.3-Be a believer: - getting into the area of "Empowerment" Empowerment is about utilizing the knowledge, skill, experience and motivation power that's already within your people.4-Reward the members of your work team:- Employees who are notable for perfect attendance, safe performance, high-quality work, or innovative ideas should receive certificates of achievement, plaques, bonuses or paid time off from work on company expance.

It is not directly pronounced as incentive; rather you can motivate people via providing recognition to their accomplished activity (whatever it will be; even it will be poor). Again, you should be fair in your every decision oneach of them. Then, as secondary to other many ways, incentive also motivates people.

Niether is the best..
both are good ways, but from my perception sharing with them the vision and granting them the owner ship so that they would be able to participate and share the success and feel the achievement..
this is the best way But again of course, it depends on the personality of the subordinates