Paper is the easiest to use and change, and it doesn't have wrinkles to deal with if properly rolled up and stored vertically when not in use. It also stores well if left rolled up on one of the wall mounts for rolls of paper, just be sure to rotate it every week or so or it will develop an oval shape. If it gets dirty you can just tear it off and use it for other uses or throw it away.
Cloth has the advantage of being cheaper over a long time since you can wash it if it gets dirty instead of having to replace it. With cloth, however, you have to contend with wrinkles. Fabric backgrounds should either be completely free of wrinkles, or massively wrinkled to give it texture - in between just looks sloppy.
As BAK said, you can also buy strips of patterned fabric for different looking backgrounds.
Thunder gray paper or a mottled gray fabric are the universal backgrounds. By adding colored gels to your background light(s) you can turn them almost any color.
White is the second background you want, black the third.
In a new studio I would recommend starting out with one of the wall mounts that holds three rolls of paper and the three colors of paper.
|Chicago Alley by tko|
from Down the alleyway
|Callan-5680 by vbuhay|
from What Child's Dream May Come
|Widget by Wilfried HKG|
|Oxbow Bend by stickpointed|
from Landscape - Colour #2