Another option is to check what stdout is hooked up to – if it is hooked up to a terminal output something human readable, if it is hooked up to a pipe output something machine readable like JSON. (Actually, a number of utilities do this terminal-vs-nonterminal check already – e.g. GNU ls with --color=auto).
One problem I've seen with this approach in practice, is sometimes you want the human readable output to go to a pipe. For example, when you use jq, it does syntax highlighting of JSON when talking to a terminal, and omits it when talking to a pipe or a file, but then you want to use a pager which understands ANSI escape sequences (e.g. less -R), so now you have to pass an option to tell the command to output ANSI escape sequences even though it is talking to a pipe not a terminal (e.g. jq -C).
I wish there was a standard mechanism in Unix for the two ends of a pipe to negotiate about what data format goes down the pipe – MIME type, character set, etc. Then if I was piping jq to less, jq could ask less "do you understand ANSI color escapes?" And less could reply "yes I do please send them". Then I wouldn't need to remember to pass -C to jq and -R to less. (Maybe this could be implemented as ioctls at each end, by which the sender transmits a list of MIME types it supports, and the receiver replies by choosing one of them...)