Paper wallets are pieces of paper that contain the keys for one’s Bitcoin address. They are completely offline, and the only way to get access to that account would be if someone found that piece of paper and scanned it. Digital wallets are online accounts that hold Bitcoin. They have much more functionality, but are much less secure as someone could hack into them and get access to the Bitcoin stored inside of them.
Digital wallets can be created by going to a Bitcoin exchange and creating an account with them. Paper wallets can be made by printing the QR code of your Bitcoin address. Many people who use paper wallets choose to print multiple copies and keep them in safe places, far from each other, in order to maximize security. Digital wallets are for people who want to have easy access to all their Bitcoin, and paper wallets are for those who want to keep their Bitcoin as safe as possible and out of harm’s way.