Two of my textbooks said it was the former, while one pointed it was both. No further details about the truthfulness of these affirmatives were given. I personally think is auditorily and articulatorily, after all we don't just guide ourselves in sound or articulation alone.
It was originally thought of as articulatorily based, but now it serves as auditory yardsticks.
Early in the 20th century, Daniel Jones developed the cardinal vowel theory thinking that the tongue made equal movements from each cardinal vowel to the next. Each CV in the vowel diagram represented the highest point of the tongue during the production of the vowel.
Jones' original theory has long been debunked, beginning in as early as the late 1920s, with x-ray photographs contradicting Jones' claims. Jones later adjusted the theory to stating that at least the extreme [i a ɑ u] were based on tongue positions and that each CV represented values equidistant in perception.
So the cardinal vowels, especially the mid [e ø ɛ œ ʌ ɔ ɤ o], now serve as somewhat arbitrary reference points rather than as values based on any articulatory or acoustic findings. This is why the cardinal vowel system is now regarded as an "auditory" one.
[T]wo fully front vowels [e] and [ɛ] are defined between [i] and [a] so that the differences between each vowel and the next in the series are auditorily equal; and similarly, two fully back vowels [ɔ] and [o] are defined to give equidistant steps between [ɑ] and [u]. The use of auditory spacing in the definition of these vowels means vowel description is not based purely on articulation, and is one reason why the vowel quadrilateral must be regarded as an abstraction and not a direct mapping of tongue position. [...]
The description of the primary cardinal vowels outlined above differs slightly from that of the English phonetician Daniel Jones who first defined them, but is in accord with a widespread conception of them today.
Here is a fairly accessible critique of the cardinal vowel system by Geoff Lindsey. For an extensive discussion of the background, development and legacy of Jones' theory, see Collins & Mees's biography, The Real Professor Higgins: The Life and Career of Daniel Jones (Mouton de Gruyter, 1998), which I highly recommend.