Paper Dragons are not truly living creatures. They are pieces of parchment enchanted by magic, and as such, are very vulnerable to fire. However, they behave almost like dragons. The only place where their behavior differs is breeding: paper dragons cannot breed.

Most of the time, Ori Papyrus has no idea what's going on. Still, he is generally very happy, especially when included, and helps the Incendiars out with their tricks, hijinks, shenanigans, and similar. He doesn't appear to know that he isn't actually alive, and being around a bunch of dragons who lie to him for their own amusement surely hasn't helped him figure it out. A few of them actually convinced him that he could breath fire, and he seemed to do so for a while, thanks to Yaiyu's illusions.