I make a lot of scrap quilts & use both paper & fabric for foundations. For my specific PP patterns I use paper- even recycled paper that only has printing on 1 side & is still in good enough shape to go through printer.
For my crazy quilt blocks & string blocks, selvage blocks - I use different stuff. Found some thin, light pink fabric in my stash yesterday & I'll put it in my bin with my crazy quilt scraps & use it as foundations. Like someone already said, the only real difference is that the paper comes off while fabric stays in.
Bonnie Hunter has all kinds of tips for this on her site- Quiltville. She says she saves all the mess ups from the printer & uses those for a lot of hers.