Drywall and plywood are the two primary materials for constructing walls in homes. Both are inexpensive because they are made of composite materials and can be put up in a quick amount of time. Each has its advantages and disadvantages, and which type you use will often depend on what you are using the place for.
Drywall is primarily composed of dried gypsum mixed with crystallized water. These two elements are mixed together and sandwiched in between two large sheets of sturdy paper. Plywood is made up of three or more sheets of composite wood that are pressed together to make a large sheet that is usually a 1/2-inch thick.
Drywall is very good at fire prevention because of the crystallized water; this substance actually makes up 50 percent of its volume. Its second material, dried gypsum mineral, is very sound resistant. The material is easily repairable with plaster or similar materials. This substance, however, can be very heavy; a full sheet often weighs in excess of 50 lbs.. It is a very soft material, so a room that will see a lot of physical activity may need reinforcement like paneling.
Plywood is more lightweight than drywall and may be more accessible to do-it-yourself builders via home improvement shops. It is resistant to shrinkage because the pieces are aligned with their grains at right angles to each other. It is, however, very susceptible to water damage because it is very porous, and it can expand in hot/humid conditions. Excessive water can destroy the adhesive that holds the boards together, causing the wood to warp.
Plywood can be used in temperate climates where there is not a consistent amount of wet weather. In very hot and/or wet climates, however, drywall is the best option. Drywall is also recommended for people constructing soundproof rooms like recording studios or those who want to ensure their home is as fireproof as possible. In either case, you may need to decorate the walls because both types are not often attractive. You may want to paint or put wallpaper on both.