What is best practice to ensure only the correct users can see a webpart in Sharepoint 2007?
Security Groups, and Audiences have both been suggested to me.
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Although audiences are not a security mechanism, for webpart visability the effect is the same. The issue with a webpart is others can add that webpart to another page that you are not controlling the audience for if you do not set the protection for the webpart in the gallery, as Lars mentioned. As he also mentioned, the audiences are only available if you are using MOSS and not just WSS.
An additional security step is to place the logic in the webpart to prevent unauthorized use. If it is truely a security concern, I would chose this approach.