That siding is made to look like tongue and groove boards. It has grooves down the face which give the appearance of individual boards. The 1x8 in the description means that the grooves are placed where the grooves would be if you were using actual 1x8 boards. If it were 1x6, the grooves would be closer together to look like 1x6 boards. This part is purely aesthetic. If you want a different looking style of siding, do it.

The sheet is 4' wide x 8' long and 1/2" is the thickness of the sheet. The 4' x 8' is the most important spec. Those plans call for 350 ft^2 . Each sheet is 32 ft^2 , so you will need 11 sheets minimum (mistakes, and the way the cuts lay out on the sheet might add to that total). The extra 1/8" in thickness shouldn't make a big difference. It will add some weight, that's all.