My Cat is Eating Paper?

He likes to bat and chase paper wads around on the floor and periodically I find that he's left a paper wad in his food bowl. I had always assumed that he was either leaving the paper wad there to mess with our other cat...or because he had had the paper wad in his mouth and then saw the food and dropped it in the bowl on accident. However, I just walked by as he was eating and saw him drop the paper wad into the food bowl. I removed it to get it out of his way. He picked it up and put it back in his mouth and then continued to eat his food. He chewed for awhile and the paper wad never emerged from his mouth. When I checked his mouth, I realized that he had just eat the paper wad with his food.

He's in really good health. Only a year and four months old. He's always eaten Science Diet dry food and I've never seen any signs of parasites or other intestinal problems. Both cats are indoors 90% of the time. When they go outside, it's only into a fenced back yard.

What's up?