A thin, unbound periodical that issues extended prose and poetic works serially and economically.
Let's take apart this concise definition to see what it all means.
Firstly, note the word 'unbound' : almost all newspapers are unbound, while all books and virtually all magazines are bound ; in fact a book must be bound to meet the most commonly agreed definition of being a book.
So unboundness ties into the implied meaning of the word paper (really short for newspaper, rather than also implying a book, magazine or leaflet which are also made out of paper.)
Note the odd pairing of specifying that a story-paper must be 'thin' (many newspapers are quite thick and few aspire to actually remaining thin forever) and yet also that its only objective is to issue 'extended works'.