In my view, the crux of the paradox is the concept of slipping (or sliding), which seems straightforward at first glance, but is not.
First let us imagine a wheel on a surface that is spinning on its axle but is otherwise motionless. In this scenario, it is obvious that the wheel is slipping on the surface, and we are not tempted to think that, just because the single point of contact of the wheel with the surface has zero length, the circumference of the wheel is zero. But what is tempting, at least for me, is to define "slipping" as the lack of a one-to-one correspondence between the points on the perimeter of the wheel and the points on the surface that the wheel is in contact with. That is, the wheel is slipping because many points on the perimeter of the wheel correspond to a single point on the surface.
But now imagine that we are spinning the wheel very fast (with uniform rotational speed) while simultaneously moving the wheel across the surface at some very slow uniform speed. Intuitively, the wheel is still slipping on the surface. But if we idealize the situation mathematically by modeling the wheel as a circle in $\mathbb{R}^2$ and the surface as a line segment in $\mathbb{R}^2$, and we limit the wheel to a single turn on its axle, then there is a one-to-one correspondence between the
points on the circumference of the wheel and the points on the surface. So is the wheel really slipping?
Galileo seems to have been the first to emphasize the usefulness of considering discrete approximations to the wheel paradox. If we replace the fast-spinning wheel with a fast-spinning $n$-gon for large $n$, then we see that there is no way to set up a one-to-one correspondence. At one moment in time, one of the sides is in full contact with the surface; then the center of the $n$-gon lifts slightly and a vertex drags (slips) on the surface for a while before the next side lands on the surface, overlapping with the part of the surface that was previously in contact with the previous side. Importantly, if we keep the rotational and (horizontal) translational speeds fixed, the total amount of overlap does not go to zero as $n$ goes to infinity. This indicates that using one-to-one correspondence to define slipping is not a good idea; it does not behave well under taking limits of discrete approximations.
As mentioned by others, the "right" way to define slipping is in terms of the velocity of the point of the wheel that is in contact with the surface. We define "no slipping" to mean that this velocity is zero. This definition does behave well when we take limits of discrete approximations. With this definition of slipping, the resolution of the paradox is easy: we are no longer tempted to identify the distance traveled by the center of the wheel with the circumference of the circle just because we can form a one-to-one correspondence between the points on the circumference and the points on the surface; we know that we also have to perform a velocity calculation. We find that the lengths match up if and only if the velocity is zero, and the paradox is resolved.
One final remark: the explanation above applies most directly to the version of the wheel paradox in which the inner wheel is rolling without slipping and the outer wheel is slipping. If the outer wheel is rolling without slipping and we are puzzled about the inner wheel, then the technique of considering a discrete approximation shows us that the inner $n$-gon is "skipping" points on the surface, and again, the total length of the skipped points does not go to zero as $n$ goes to infinity. There is a beautiful Up and Atom video that demonstrates this point clearly.