My insulation was installed paper towards the roof.
Yes it matters! Paper side should go down (toward the living space) because the paper side has a vapor barrier that will trap any moisture. If you install it backwards, you'll trap moisture in your insulation and make it less efficient. If you are installing additional insulation over existing, you can install the paper side up and then cut the paper side to provide an escape for and vapor.
If it's in direct contact with the ceiling, the paper side should be down, as noted by most of the other posters. But if the insulation is in addition to something that was already there, it should be installed without the paper at all so that the vapor barrier doesn't trap excess moisture in the previously existing insulation.
My husband has been in construction for over 15 years, and it ALWAYS goes paper side OUT, it keeps any insulation pieces from coming off onto the people that install the drywall, and if the drywall ever has to be removed due to water damage, etc, the paper should help keep the insulation from falling all over the floor. Insulation has very small fiberglass pieces in it that can get into your lungs if you inhale it and cause serious problems, so if you need to pull it out and re-install it, use a breathing mask! Good luck, Tricia
The paper (which is really a vapor proof barrier) should go toward the warm (in winter) side. The reason is to keep the insulation away from water vapor which will condense into water when it comes into contact with the cold, thus saturating the fibers and decreasing the insulation value. The batts in your ceiling were improperly installed if, in fact, the paper is actually a vapor barrier.
The paper is called a vapor barrier. It always faces the inside of the house. The vapor barrier keeps the moisture in the house. This makes the house more comfortable and increases the efficiency of the insulation. Moisture that gets into the insulation fills some of the air pockets and conducts heat through the insulation. That is bad. The air pockets help the insulation keep the inside and outside temperatures apart. Also, moisture can promote mildew or mold. Moisture in the air is also good for our respiratory systems. The proper installation procedure for your insulation should also be somewhere on the packaging.