Jakob Neilsen - again. Paper prototyping as a method for avoiding costly changes to code after full implementation - do the design on paper first! (wow - who would have thought of that??)Actually, these are often created on Photoshop etc and printed out. So, the graphics package is giving your user a really attractive, computer generated, visual impression that looks much like the final product might look.
Furthermore, the suggestion is that a prototype - even when it is coded - doesn't have to contain full functionality. So, for example, an asp or php site with dynamic content would not have to be functional - just pretty enough to convince the client.
Many of the observations on this are similar to what was learned/discussed during Warren's module. The waterfall model is slow but reliable, the spiral method is quick and effective but costly and labour intensive etc etc.
OBSERVATION: Based on my own experience I have found that clients, since they often know very little about web design themselves, are quite happy to accept your recommendations, assuming your designs look impressive enough. Therefore, the purpose of prototyping or other design methodology is simply to ensure that you, the designer, end up with the best possible site in the most efficient manner.