I get asked this question quite frequently at the pet store so I'm posting it here.
Which Bedding is better the paper or the wood?
We use both types in the small animal habitats and I find that it depends on the type of animal you have. If you have a gerbil or dwarf hamster the wood bedding works fine the amount of urine these animals produce is minimal so there is no problem. But with the larger animals I feel the paper bedding is better since it is more absorbent. Wood bedding doesn't suck up as much of the moisture it just floats on top.
Now there are several different styles of bedding even in the paper style but something to remember is never use PINE or CEDAR wood as your pets bedding. They give off toxic fumes that can cause respiratory problems in your small animal.