I haven't used Paper.js, but I've used Raphaël and the main differences I see right now is that Paper uses Canvas, while Raphaël simulates/uses SVG. As a result, Paper should be more practical for making dynamic content that uses user input or is "very dynamic".
Raphaël on the other hand, provides a simple system for making relatively "static" vector images with very good support for a lot of browsers (IE6 support, even). If you need user input, I think I would've tested out Paper and most likely ended up with that.
So basically: Raphaël for vector images that may be scaled and simple, dynamic images. Paper for animations and e.g. games.
Raphaël on the other hand, provides a simple system for making relatively "static" vector images with very good support for a lot of browsers (IE6 support, even). If you need user input, I think I would've tested out Paper and most likely ended up with that.
So basically: Raphaël for vector images that may be scaled and simple, dynamic images. Paper for animations and e.g. games.