Answer: The soil microorganisms that decompose organic matter need both carbon and nitrogen to do their work. Wood chips are high in carbon, so to decompose them, the organisms "steal" nitrogen temporarily to continue their process. Eventually it is returned to the soil in the form of more decomposed nutrients.
"Mulch" is a term that is used commonly to mean a number of things. Usually, mulch is layered on top of the soil, to inhibit weed germination, maintain soil moisture and reduce soil temperature. Compost is more decomposed than mulch, and it is incorporated directly into the soil in garden beds. Yes, it is good to add organic matter to the soil on a regular basis. However, you might want to use the wood chips on paths or on top of the soil as a mulch, rather than dug into the soil. Used in this manner, it is unlikely that they will decompose fast enough to rob nitrogen from your plants. You could also add nitrogen materials to the wood chips in a compost pile, such as grass clippings, fresh manure, green trimmings, which would speed up the decomposition process, and then use that compost. Hope this clarifies things a bit.
As for one mulch being "better" than another, I think that any organic matter added to the soil is a good thing!
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