John:
When you install plywood subflooring or underlayment, the directions will normally tell you to leave a 1/8 inch gap between panels to accomodate any expansion of the panels.
You see, lumber is shipped from the mills in what's called a "kiln dried" condition, which means that it's supposed to have a 19 percent moisture content or lower. Typically the lumber will have a higher moisture content than 19 percent, and the equilibrium moisture content of wood indoors will typically be about 16 percent. As the wood dries, it shrinks, and it's that shrinkage that causes both floor squeeks and nail pops in drywall. That is, as a 2X4 wall stud or 2X10 floor joist shrink, a gap develops between the stud and the drywall or between the floor joist and the subfloor nailed to it. The floor squeek you hear is actually caused by both the subfloor and the nail vibrating as they rub against one another.
Plywood is the opposite. In order to glue the thin plies of wood securely together, they have to be dry. So, when plywood leaves the factory, it typically has a moisture content of only 4 percent. So, when plywood goes into service in a house, and it's moisture content gradually rises to about 16 percent, the plywood panel will expand a bit. It's that expansion that the prescribed 1/8 inch gap between plywood panels in a plywood subfloor are intended to accomodate.
So, the gaps between plywood panels are intended to prevent any buckling of the floor in the event there's not enough room allowed for expansion. Would you want to leave 1/8 inch gaps between the plywood panels on your walls? Prolly not.
Also, you won't like the look of plywood on your walls. I once saw a picture of a house with stained and varnished plywood on all the walls, and it was just too dark. The walls were dark and it was dark inside the house. The white or off white paint typically used indoors very much helps brighten interior space.
But, I agree that you can hang plywood on walls just like drywall. If you ever replace that plywood with drywall, then you'll need to accomodate the difference in the thickness of the two kinds of materials. For example, electrical boxes for light switches and duplex receptacles will have to be built out cuz of the thicker drywall. Similarily, the door jambs around doors would have to be built out cuz of the thicker drywall.
