TILEMODE
Tilemode is a system variable that when it is on, the active drawing area must contain at least one tiled viewport.  AutoCAD starts all of its default drawing sessions with a single tile that equals the size of the drawing area.  You will use the Vports command to create different types and sizes of tiled viewports.  While Tilemode is off, the drawing area can have one or more untiled viewports of any size. Also, when Tilemode is set to off  you will use the Mview command to create your viewports.  This is simply put by stating that; when Tilemode is off you can be in either Paper Space or Model Space.  When Tilemode is on you can only be in Model Space.

MODEL SPACE
Model space is the most used AutoCAD mode.  Here is where you will create and edit your model.  AutoCAD starts its drawing sessions here with a single viewport that covers the entire drawing.  In AutoCAD R14 you can have up to 48 tiled viewports during one drawing session each of which can display a different aspect of your drawing.   The tiles in model space must fill the entire drawing area.

PAPER SPACE
Paper space is the AutoCAD mode that instead of creating a model, you will define its appearance of output.  You do this by placing one or more untiled viewports on your drawing area to show different aspects of your model.  The first time you switch to paper space you will get a warning that Tilemodes must be turned off (set to zero).   Once you do this you will be prompted to use Mview to insert model space viewports.   Unlike Vports where all of the views are tiled and in a distinct rectangle, Mview allows you to build a viewport to suite your needs.  Once a viewport is created using Mview you can modify its size and placement in the drawing area by clicking on the frame and toggling the grip mode.

VIEWPORTS
A viewport is a portion of the drawing area that shows some or all of a drawing.   While Tilemode is on the number tiles that you create must fill the entire drawing area.  If Tilemode is off, the tiles that you create do not necessarily need to fill the entire working area and they may overlap. 
This is the closest definition of Tilemodes.   Tiled viewports never overlap and consist of the entire drawing area.  Nontiled viewports may overlap each other and will not necessarily fill the entire drawing area.

ADVANTAGES
The clearest advantage to Paper Space is that if you have a complex 3D model, you can display any view of the model without modification to the actual drawing.  This is an good point for 2D drawings as well.  If you have a large or complex plan or a busy detail, you can use Paper Space to effectively show your drawing.

DISADVANTAGES
The largest problem with using Paper Space is annotation.  If you have a model that requires a large amount of dimensioning and a many Mview viewports that are displayed at different scales.  Although possible, you will go through allot of trouble dimensioning a single model that requires many scales to be effectively shown.