It's not pen and paper, exactly. You'll receive a silly yellow dry-erase pad and a pair of black markers, and you can use the same pad for both the quant and verbal sections. If you run out of space during the test, let the proctor know, and he/she will bring you a new one.
If you want to practice with the pad, you can buy one on Amazon: http://www.amazon.com/Manhattan-GMAT-Si ... 0979017580
Helping students kick the GMAT in the nuts since 2002... www.gmatninja.com.