What is Paraphrasing?

Taking the ideas of another person and expressing them in your own words.
A
much more specific re-wording than a summary, which focuses on one
central idea. A paraphrase goes into the details, with more complexity
and information.
A reasonable way to borrow from another source, if accompanied by source documentation.

How do I Choose Between Paraphrasing and Quotations?

Paraphrasing is preferred when there isn’t great
expression or idea in the piece of writing. Quotations should be used
when the original author had a powerful, unique form of expression you
want to preserve.
Use paraphrasing when it will function as well as a quotation.

Use of Paraphrasing in a Paper

(Taken from the Purdue Online Writing Lab, http://owl.english.purdue.edu/handouts/research/r_quotprsum.html)

Writers frequently intertwine summaries, paraphrases, and quotations.
As part of a summary of an article, a chapter, or a book, a writer
might include paraphrases of various key points blended with quotations
of striking or suggestive phrases as in the following example:
In his famous and influential work On the Interpretation of Dreams,
Sigmund Freud argues that dreams are the "royal road to the
unconscious" (47), expressing in coded imagery the dreamer’s
unfulfilled wishes through a process known as the "dream work" (44).
According to Freud, actual but unacceptable desires are censored
internally and subjected to coding through layers of condensation and
displacement before emerging in a kind of rebus puzzle in the dream
itself (21).

Examples of Paraphrasing and Direct Quotes

Direct Quote	Paraphrase
"The protest provided a wonderful opportunity for those interpreters to assist the deaf community" (Gannon 95).	The DPN protest was a great opportunity for deaf people to bond with interpreters (Gannon 95).
According to King Jordan, "Deaf people can do anything but hear" (72).	I. King Jordan asserts that Deaf people can succeed in life (72).

6 Steps to Effective Paraphrasing

Reread the original passage until you understand its full meaning.
Set the original aside, and write your paraphrase on a note card.
Jot
down a few words below your paraphrase to remind you later how you
envision using this material. At the top of the note card, write a key
word or phrase to indicate the subject of your paraphrase.
Check
your rendition with the original to make sure that your version
accurately expresses all the essential information in a new form.
Use quotation marks to identify any unique term or phraseology you have borrowed exactly from the source.
Record
the source (including the page) on your note card so that you can
credit it easily if you decide to incorporate the material into your
paper. (Purdue Online Writing Lab, http://owl.english.purdue.edu/handouts/research/r_paraphr.html)

Examples of Paraphrasing and Summary

Original Quotation

Paraphrase

Students frequently overuse direct quotation in
taking notes, and as a result they overuse quotations in the final
[research] paper. Probably only about 10% of your final manuscript
should appear as directly quoted matter. Therefore, you should strive
to limit the amount of exact transcribing of source materials while
taking notes. Lester, James D. Writing Research Papers. 2nd ed. (1976): 46-47.

Legitimate Paraphrase

In research papers students often quote excessively, failing to keep
quoted material down to a desirable level. Since the problem usually
originates during note taking, it is essential to minimize the material
recorded verbatim (Lester 46-47).

Acceptable Summary

Students should take just a few notes in direct quotation from sources
to help minimize the amount of quoted material in a research paper
(Lester 46-47).

A Plagiarized Version

Students often use too many direct quotations when they take notes,
resulting in too many of them in the final research paper. In fact,
probably only about 10% of the final copy should consist of directly
quoted material. So it is important to limit the amount of source
material copied while taking notes.

“Rarely, if ever, do we develop ideas in our individual minds, free of the effects and influences of others’ previous findings, claims, and analyses. This is not to suggest that writers never forge new ideas; rather, the majority of one’s thoughts—and certainly the intellectual thinking that we do in university settings—is
prompted, shaped, and changed in response to and in light of what has
already been stated by others. Our ideas emerge in response to reading
others’ texts, in sites of conversation and verbal exchange, with and against the grain of the words and formulations of others.” (Duke University Library Page, http://www.lib.duke.edu/libguide/plagiarism.htm)