How are a paraphrase and a quotation similar?

Quotation marks use exact words from the source, correct? So does paraphrasing, it's from the source but used in your own words.

lee and grant, both of whom held the highest rank in their respective armies, had known each other slightly during the mexican-american war (1846-48) and began their dialogue by exchanging awkward personal inquiries. characteristically, grant had arrived in his mud-splattered field uniform while lee had turned out in full dress attire, complete with sash and sword.

explanation:

during world war ii