There are two kinds of Paragons:
Paragons can be identified by their name extension (grand/elite) as well as their color coded overhead Paragon tag as shown in the picture.
Grand Paragons are a stronger variants of it's original.
Elite Paragons are even stronger than Grand Paragons.
On every creature spawn, there is chance that a mob gets transformed into a Paragon.
The chance depends on the region the mob spawns in.
The loot is up scaled accordingly to the new stats and skills of the creature.
Additionally, each paragon will have a Paragon Chest in its loot.
The higher the players luck value and the tougher the enemies they defeat, the higher the level (1-6) of the Paragon Chest they'll receive. Color coded as shown in the picture.
To open a Paragon Chest, you need to pick the lock and deal with the trap.