Psychic paper was a blank, white card that had special properties. When shown to a person, it could usually induce them to see whatever the user wished them to see printed on it. However, it proved useless on geniuses such as William Shakespeare…
It made three appearances during series 1, in The End of the World,The Long Game and The Empty Child while it has currently been seen in New Earth and Tooth and Claw. During the first episode of the current series, it was shown to be able to receive messages, like The Face of Boe’s request for the Doctor to meet him.
It seems to be fairly common as Captain Jack also has some during The Empty Child episode.
In the hands of untrained users, the paper was prone to displaying facts they subconsciously wanted the reader to be aware of. This could be quite embarrassing, such as in Rose Tyler’s case. (The Empty Child)
When the intended thought was too unbelievable, the psychic paper would only display squiggly lines. The Eleventh Doctor explained that such a lie — in his case, that he was universally recognised as a mature and responsible adult — shorted it out because it was “too big”. (A Christmas Carol)
The paper did not work on people of genius, such as William Shakespeare, making him the first person the Doctor met who was naturally immune to it, (The Shakespeare Code) or on people who lacked any imagination. (Flatline) It also didn’t seem to work on some species, such as Saturnynians. (The Vampires of Venice)
The “basic psychic training” that was standard at Torchwood One was enough to distinguish psychic paper from real. (Army of Ghosts)