It operates in 2 modes.Real mode and protected mode.
In real mode, it is said that, combination of segment and offset address helps us to access a memory location. The segment address defines the beginning address of any 64kB segment. Offset chooses any location within that 64kb segment. So the 16 bit segment address is appended with zero to make it as a 20 bit address allowing it to access the start of the segment at any 16 byte boundary within the first 1 MB memory. This is required to create a 20 bit address.
B'coz of the appended zero, real mode segments can begin only at 16 byte boundary in the memory system.The 16 byte boundary is called paragraph.
I couldn't understand the bold part.
Reference : Intel microprocessors, Barry-b-brey ( page : 66 )