In simple words, a paleo diet is when present day humans return to a way of eating that existed in the Paleolithic era. A paleo diet involves unprocessed meats, healthy saturated fats, fish, fruits, vegetables, nuts, and seeds. The most important aspect of the diet is to remove highly processed, nutrient lacking food in order to live a healthier life. While it can be a very restrictive diet, for most people this is unrealistic and unnecessary. The most devoted followers of the paleo diet would never be seen eating dairy, let alone touching rice or potatoes, but you can still call it paleo if you use butter or a few starchy vegetables now and then.
With the amount of diets being talked about these days, it gets really difficult to understand what they all are. The keto diet, for example, has some similarities but one major difference with the paleo diet. The primary difference between the two is that the paleo diet puts much higher importance on eating whole nutritious foods, whereas the keto diet is about maintaining the metabolic state of ketosis.