The term paper gold means you have a piece of paper acting as a substitute for the physical gold. With paper gold, you don't own the gold; you own a promise to receive physical gold. In plain English, it means you are a creditor of the corporation issuing the paper gold certificate, thus subject to counterparty risks. Owning the physical gold has no counterparty risk and is fully under your control.
Corporation issuing the paper gold certificate ARE REQUIRED TO DELIVER, weather they have the gold or not.
If they do not have the required gold for demand, they have options, issue another paper gold certificate, Buy Gold on the open market to deliver or GO bankrupt and stick it to the paper gold certificate holder.
Examples of paper gold are gold certificates issued by banks and mints, pool accounts, futures accounts and the NYSE listed exchange-traded fund. With these products you own a piece of paper rather than physical gold. These paper products give you exposure to the gold price; you can make a profit by selling them to someone wishing to own paper gold, however when the music stops and nobody wants to purchase paper anymore, it becomes worthless since you may not able to redeem your metal.