Multisite with i18n module enabled
You should read Drupal 7's new multilingual systems compilation. There's even a full book about that matter: Drupal 7 Multilingual Sites.

When using a single Drupal instance to create a multilingual site, there are two different approaches: Content Translation and Entity Translation (Read: Node translation vs. Entity (field) translation). You may want a multi-site setup (With Domain Access or without it), especially if you require independent content to appear (not only translations). And the Internationalization suite of modules is a must, it provides the following modules:


Path Translation
String Translation
Taxonomy Translation
Block Translation
Variable Translation