While hay is not a good bedding material when used alone, it works well when combined with other absorbent bedding materials, especially if you wish to set up a litter box. The hay itself is not absorbent and should be removed and replaced daily.
Low cost when purchased by the bale
Must be replaced daily
May be hard to find inexpensively
Wire floors are a poor choice for the floor of the enclosure as they can cause broken nails, toes and legs. The theory behind wire flooring is to allow the pee and droppings to fall onto a tray below.
For some cavies prone to urinary tract infections, an open grid floor can help to keep the cavy drier, resulting in fewer infections. EnviroTiles are a safe alternative and have been successfully used by a few cavy owners (try a Google search for other suppliers).
May keep cavies drier
More difficult construction of housing
Requires absorbent material under tiles and cleaning/maintenance