You can do live rock, dry rock, and even no rock (this can get tricky). All live rock can be expensive especially for a larger tank. Live rock brings lots of life into the aquarium in the form of hitchhikers. These hitchhikers can be good and they can be bad. Sometimes the bad cause many headaches, so you want to be sure to check the rock real good. The hitchhikers have caused some hobbyists to rip apart their tanks just to get them out. Dry rock is very economical but lacks the hitchhikers and diversity. Typically, it will cause a tank to cycle longer since there is no life on the rocks. Now, some people don't use rock. I personally don't like the looks of these. It works OK for fish only, but IMO makes a reef look gaudy.
I recommend using dry sand. The bagged "live" sand that you see on store shelves is really just wet sand. You just want to make sure the sand is recommended for aquarium use. You can seed the sand with a cup of sand from another hobbyist's tank to add some diversity in the microfauna.
In the end, the sand and rock will become live.