Why, how do wood chips use up nitrogen in the soil? and will this make ground more acidic or less acidic?

I'm not sure of the exact sciency bit but basically I think its when fungi/micro-organisms in the soil break down the wood chip, they use nitrogen for the process which they take from the soil. I don't think its really a problem if the wood chip is well rotted. As for acidity, that would depend upon the wood-chip used, I know a lot of conifers tend to produce acidic wood-chip.