My house sits atop my garage in san francisco. The garage is unfinished on the ceiling and sides. On the sides the walls have wood boards (5"x2") separated by 14". Not sure about the ceiling spacing. There is no insulation between the house floor and the top of the garage - I can drill through the subfloor. I'd like to make both the house and garage warmer. I've been told to put up insulation, then cover it with plywood or gypsum board. Suggestions for the type of insulation I should use?

Measure the distance between floor joists and from bottom of joist to the subfloor above. If space allows use R-25 fiberglass insulation with a vapor barrier (paper side facing the garage below). Roll insulation comes in different widths depending on location/application.The R factor determines the thickness of the insulation most times. Packages will have charts on them to help you determine what width and how many batts you will need to purchase to cover the intended square footage.
Eye protection, mask and long sleeves I would highly recommend wearing!!!

Thank you - I'll wear gloves too. A friend of mine was telling me just to put insulation on the ceiling of the garage (below the subfloor and not the wall of the garage. It doesn't make sense to me to just insulate the ceiling and not the walls. Your thoughts?

If you plan on or spend a lot of time in the garage space I would do the walls as well. If your garage door is not insulated your going loose some accomplishments in the space. Insulating the walls adjacent to any living space is an absolute.