Paper, while doubling as a backdrop itself, also the key ingredient in making other, fancier (and more colorful) wallpapers.
How to Obtain
Unlike its colorful wallpaper cousins, pure paper cannot be found in-of-itself in the world. It is simply a byproduct of mining deteriorated wallpaper. It, however, can be obtained via looting sacks and barrels, also unlike its colorful cousins.
How to Use
It is used in crafting various wallpapers and other items. As a backdrop, it's pretty self-explanatory. Simply place on an available background tile (air, cave wall, etc) and you have a very plain, old-style paper wall. No drawing on the walls, please.