Both formulas are used, one to encode gamma, and one to decode gamma.
Gamma encoding is used to increase the quality of shadow values when an image is stored as integer intensity values, so to do gamma encoding you use the formula:
encoded = ((original / 255) ^ (1 / gamma)) * 255
Gamma decoding is used to restore the original values, so the formula for that is:
original = ((encoded / 255) ^ gamma) * 255
If the monitor does the gamma decoding, you would want to use the first formula to encode the image data.