Also, paper is a very shareable medium. Both in terms of being able to pass around, whether in the office or by scanning in, and also because it's so amenable to collaboration, which is really important for me and getting participation from a wide range of people. No one's going to be intimidated by some sketches on a piece of paper, so it's great for creating conversations with programmers, marketers, etc.
If anyone's interested in a longer explanation, I gave a presentation on prototyping at Adobe last month and a good chunk of it was about how much I love paper:
http://tr.im/gMJ9 (slideshow + audio)