Paper lanterns come in various shapes and sizes, as well as various methods of construction. The easiest form, is simply a paper bag with a candle placed inside, although more complicated lanterns consist of a collapsible bamboo or metal frame of hoops, covered with tough paper.

Often associated with parties, paper lanterns are common in China and Japan, and similarly, in Chinatowns, where they are often hung outside of businesses to attract attention. In Japan the traditional styles include bonbori and chōchin and there is a special style of lettering called chōchin moji used to write on them.

Placing candles or tea lights in a succession of small white paper bags (known as luminaria or farolitos) is a common tradition in Hispanic communities during Christmas.

In China, paper lanterns can be classified into 5 distinct classes; the Baby's Bottom is the miniature class, often used in modern times with Christmas lights. The second class is the Rolling Paper, the tall, cylindrical lanterns often associated with restaurants and bars. The third class is the Tomato Light also known as Big Red; the classic round mid-size lantern. The fourth class is the Crystal Magic; the variously-shaped geometric lamps constructed of many square and triangular panes. The last is known as Buddha's Gastronomy; the large and extra large lanterns used to decorate temples and for show at festivals.

Red paper lanterns were once associated with brothels, and this is reflected in the term red light district. In Japan, red lanterns are often used as advertisements hung just outside bars and restaurants.

High-wattage paper lanterns are commonly used in motion picture productions to provide soft, edgeless light to a scene.

Fairy Lamp A type of night light patented in 1857 by Samuel Clarke. Fairy Lamps have an appearance distinct from Chinese paper lamps.

Fairy lamps are a product from the Victorian Period (1840's to 1905). The Clarke Family of London, England produced an improved candle light. George Miller Clarke applied for a patent in 1844, but the patent was awarded to Samuel Clarke in 1857.

According to the patent, paper was used in the Fairy Lamp, but the 'chimney' was a glass covering.