Works very well for starting seeds.
I use them every winter like so:

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Then cover the container with plastic or slide it in a plastic bag with drain holes & vents then leave the whole thing outside like so:
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I still have a bunch of those paper pots with seedlings sitting there waiting to be planted out. I'm way behind with garden work this year. :-)

Does the type of paper make any difference?

I do the same thing. I LOVE it!! It actually works better because you can vary the depth--like making very deep (8-10") paper pots for second transplantings of tomatoes (bury them deep, they root anywhere on the stem). THen you can put the deep tomato pots into tupperware bins, and water all of them all at once from the bottom by watering into a corner of the bin. Still need a fan or air circulation, though.

I make these. Use one sheet of newspaper, fold into thirds lengthwise, then roll around a cylinder about 2" diameter. Secure with a length of adhesive tape on the side. Form the bottom while still on the cylinder by pushing toward what will be the center bottom of the pot. Again, secure with a strip of tape. Voila - a pot!