Before drywall, builders nailed lengths of wood, called lath, to the studs and then applied several coats of plaster to that for a smooth finish. As many of us with old houses can attest, lath and plaster walls can last a long time but they're hard to deal with if you're having rewiring, insulation, and plumbing needs.
U.S. Gypsum developed a way to sandwich plaster between two paper faces and make wallboard as early as World War I, but the manpower shortage of World War II is what really made it catch on.
Choosing the Right Drywall
Drywall comes in various thicknesses. For interior walls, one-half-inch works fine but won't stand up to heavy abuse. Five-eighth-inch is required for fire hazard walls like garages and basement entries. Standard paper-faced drywall is grey and comes in 4×8 or 4×12 sheets, designed to make it easy to cover from stud to stud with minimal cutting.
Even cutting is made easy. Most drywall scores and snaps with a simple utility knife. Holes can be cut by hand with a short keyhole saw or a small rotary tool.
Special fiberglass-faced drywall was introduced to help prevent mold problems that can develop when traditional paper-faced drywall gets wet. This new product finishes just like paper-faced drywall with tape and joint compound. Behind tile, in bathrooms and in other wet areas, it's important to use cement board. This denser product is waterproof and faced with fiberglass mesh that won't degrade or mold when it gets wet.
In the past, some builders used a product called green board in bathrooms, but time has shown that this product is not a good substitute for cement board.