"Paper or plastic?"
Bags, of course.
The paper bag that we run into all the time these days in the average grocery store (or under our sinks, in our closets, etc. from our last trip there) dates back, in its present form, to the mid-1800s. Although paper has been used for packaging for hundreds of years, prior to around 1750 or so it was in fact an ostentation, as paper was manufactured mostly by hand and used primarily for writing on. Wrapping something in paper, or forming a container out of it, would be somewhat akin to having a nice cashmere bag today - you generally wouldn't provide those for free with purchase.
In any case, up until 1870, mass-produced paper bags looked much like envelopes, with folded-over structure and flat edges/sides. Although flat-bottomed paper bags existed, they were difficult to make, requiring manual labor. In 1870, a woman named Margaret E. Knight patented a machine (which she'd invented in 1867) which could fold and glue paper so as to produce a bag with a flat bottom. The mass-produced paper bag was now useful for actually carrying object of some weight and volume. That machine is now the property of the Smithsonian Institution, in Washington, D.C.
By 2001, according to the U.S. Census Bureau, there were 767 firms in the U.S. involved in the manufacture of paper bags and treated paper, with a total payroll of over $2 billion. According to the American Forest & Paper Association (which appears to be a paper industry group), paper grocery bags come made from paper of 25 to 70-lb weight, capable of holding between 2 and 25 lbs. of cargo.
A single company, the Union Bag and Paper Company, of Georgia (U.S.), produces over 35,000,000 paper bags per day. That's a hell of a lot. There is an ongoing debate, fiercely fought, between proponents of paper and plastic bags, both of whom are reviled by those who feel shoppers should tote reusable cloth bags. Although evidence seems to indicate that paper bags cost more energy per bag to manufacture(it's hard to wade through competing advocacy group statistics), there is one big point in paper's favor: unlike plastic bags, paper bags are biodegradable, being made of out not much more than wood pulp and some glue. Plastic bags tend to stick around, causing an enormous percentage of litter-based pollution. Also in paper's favor is that it is a renewable resource (if slowly). Paper is made from cheap, soft wood, which grows faster than other wood crop. Plastic, on the other hands, comes from petrochemicals (snooty word for oil, brother) which, as we all should know, probably aren't renewable.
Paper bags are useful for all manner of things, of course! Besides just carrying things home, you can have all kinds of fun with them. Light enough paper bags can be made into hot-air balloons (if you're really, really careful!). Paper bags can be blown up and burst to surprise the unwary! They can be used as insulting cliches ("You couldn't think your way out of a wet paper bag!"). Upside down and placed on one's head, they make excellent costumes, as they can be drawn upon. In a chilly emergency, you can burn them for warmth with little worry about toxic fumes (unless they're plastic-coated, of course). Unlike plastic bags, they fold neatly (assuming they're not damaged) and can be stored flat. Wrapped around a bottle of hooch, they can protect you from the po-po while advertising one's sleaze factor! Opened, lying on their sides, they provide excellent pet toys.
So next time you're in the grocery store, pick up a few.