Let's say that you want to introduce information from another source (a book, a journal article, or website, for example) into your paper. You could approach this by quoting the work directly or try to convey the information from the original source in your paper by rephrasing it in your own words. This latter approach is paraphrasing.
Let's take a moment to make a clear distinction between the two:
Quoting: To quote is to include the identical wording from the original source in your paper. Quoted material in your paper is distinguished from your own words by the use of " " or by indenting the quoted text (if quoting a longer passage). In addition to quotation marks or indenting, all quoted material should also be cited, using either footnotes, endnotes, or in-text citation.
Paraphrasing: To paraphrase is to include the ideas or information from an original source in your paper by rephrasing those ideas or information in your own words. The key to successful paraphrasing is to use as few words as possible from the original text--be mindful not to change the meaning that you are trying to convey as you rephrase--and to cite your paraphrase. Without proper citation, your paraphrase could be construed as plagiarism.
Tips for paraphrasing
Reread the original passage until you understand its full meaning.
Set the original aside, and write your paraphrase on a note card.
Jot down a few words below your paraphrase to remind you later how you envision using this material. At the top of the note card, write a key word or phrase to indicate the subject of your paraphrase.
Check your rendition with the original to make sure that your version accurately expresses all the essential information in a new form.
Use quotation marks to identify any unique term or phraseology you have borrowed exactly from the source.
Record the source (including the page) on your note card so that you can credit it easily if you decide to incorporate the material into your paper.