A Sprite in Paper 2D is a Texture Mapped Planar Mesh and associated Material that can be rendered in the world, created entirely within Unreal Engine 4 (UE4). In simpler terms, it's a quick and easy way to draw 2D images in UE4.
Sprites can also be edited inside UE4 in the Sprite Editor which offers four modes: View for previewing the sprite and general statistics, Edit Source Region which displays the full source texture and allows you to set the area within the source texture that composes the individual sprite, Edit Collision displays and allows editing of the sprite collision shapes, and Edit RenderGeom which displays and allows editing of the sprite render geometry.
Once you have a collection of Sprite assets, you can then begin animating them by creating a Flipbook which sequentially will play through the Sprites added to the Flipbook. See the Flipbook documentation for more information.