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first, we must do a distinction between foreign key and lookup table!!
second, i do not seen the usefulness of lookup table in database?!
but in programming its verry useful, for Lookup combobox, lookupfield.....
so its better to use lookup table in application Level
Include LOOK UP tabels in the database level..
Lookup tables at the database level is better because this will allow you to add more values without having to change the application. Lookup at app level means the lookup values will be hardcoded. This is ok only in cases where the values are limited and are not expected to change during the lifetime of the app.
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