Is truth important, or are we tied down by "politically correct"?

"Do you want the unvarnished truth, or do you want to hear the sweet-talk?"

When it comes to business processes and project status, I've heard it both ways. Some executives want you to sweet-talk them and some want to be made clearly aware of the precise facts. How about you?

Granted, there are always conditions and dependencies. Every situation is different... Let's assume that we'll all be polite, but not play diplomatic double-speak games. That being the case, in general, how do you feel, as an employee, about "telling it like it is"? Or, if you're in management, how do you want your personnel to deliver communications?