If you turn Row borders on (from the View control dialogue box) you will see that each paragraph is a separate row. Whenever you press Return, a new row/paragraph is started, contained in its own cell and with the additional paragraph spacing rather than just the line spacing.
The lines inside the row/paragraph are spaced according to the line spacing only, without the extra above/below paragraph space added. However, you may want to start new paragraphs but keep them linked together as part of the same row. For example, if you type in an address you have to press Return to start each new line, but you don't want each line to be treated separately. This will start a new line with a line space rather than a paragraph space between the lines; see Starting a new line without starting a new paragraph.