Paper prototyping lets you forget about the constraints of the tool that you are using, and forget about the fine details so that you can focus on the bigger picture.
That said, there are other tools that work well as substitutes. I often use Draft on my iPad as a replacement, and I'm sure there are other similar tools out there. The key is that when you are focusing on the concepts or the higher level design, you need a tool that helps you ignore the lower level detail. Paper prototyping is just a very effective way of doing this.
But, some people prefer to not start with paper prototyping and would rather jump right in with html mockups, or Balsamiq. While others prefer to start with more powerful tools like Handcraft.
Use whatever works for you. Paper mockups work well for me, and many others, but not for everyone.