From the Super Mario Wiki, the Mario encyclopedia
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Paper Toads are paper incarnations of Toads, based on their appearances in the Paper Mario series, that appear in Mario & Luigi: Paper Jam. They, along with many other paper entities, came out of a magical book that Luigi accidentally knocked over in the attic of Peach's Castle.
They are often extremely afraid of the real world and often hide in areas throughout the Mushroom Kingdom, requiring Mario, Luigi and Paper Mario to find them on missions that the player can initiate through the Lakitu Info Center. These missions are often requested by Toadette, due to her requiring Paper Toads in order to build Papercrafts. After enough Toads are saved, the trio are sometimes rewarded with a Trio Attack. As the story progresses, many Paper Toads befriended their real-life counterparts. They also have a critical part in the story as being the "Toad Stairs" that take the trio from Mount Brrr to Neo Bowser Castle.