Paper is made up of fibers which consist of mainly wood pulp and fibers made from cloth. The wood pulp fiber lets a sheet of paper hold it's shape, as opposed to a cloth napkin which does not hold a fold.

If you would try to bend a piece of wood, it would break and you would not be able to put it together the way it was. This is obvious because the wood is broken, but it is actually the fibers of the wood that are broken.

 The same with a piece of paper, when you are bending it you are actually breaking all those little fibers of wood. The cloth fibers that are mixed in make it pliable or flexible so the paper doesn't break, it just bends. But the crease forms because you can never repairs the broken fibers that were cause when the paper was folded.

You can make the paper completely flat again by getting it wet or damp and then pressing it wth enough weigjht. The water causes the little fibers to intertwine again and so the paper will look like it was never folded.