Paranoid, was actually an accident. At the time, the band was working on their seccond album which was supposed to be called "War Pigs", but it was made aware to the band that they needed a up beat, three minute song so they could play it on the radio, as opposed to the more "album based" songs like, "Iron Man", "Fairies Wear Boots", or "War Pigs". This one was actually written by guitarist Tony Iommi, instead of normal lyricist, and bassist Geezer Butler.
Paranoid became the album's single, and would be the one that would be played predominately. Since this was the single, the record executives decided that it would be easier to sell the album if it had the same name as its single. So, at the last minute, plans, and titles were changed. Unfortunately, the album cover did not. They were stuck with a strange looking man holding a sword (which would have worked had the single been War Pigs).