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The sheathing is the plywood wrap that goes over the framing.  It both provides a substrate for the cladding (siding + house wrap), but also acts structurally.  In commercial buidlings you’ll see non-structural sheathing, but in houses its more cost effective to use the sheathing structurally.  It adds shear resistance, which allows the building to handle horizontal loads from settlement, or more importantly, wind.  The sheathing in my case was supposed to be 1/2″ plywood. They used OSB which I mentioned before is the stuff that looks like a bunch of wood chips glued together.  They argued that OSB is stronger, but the problem is that it more easily degrades when exposed to moisture.  The wood chips become delaminated which is far more likely than plywood delaminating.  Just another unapporved substitution.  I hope the house wrap goes up soon so I can forget about it.