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A paradox is a contradictory statement that expresses a truth. The witches are contradicting themselves. They say that Banquo is both lesser and greater than Macbeth. How can both be true? It would seem that they couldn't be - however, let me show you how they are.
Banquo is "lesser" than Macbeth in terms of power. He does not have the political power that Macbeth has and will continue to get - Banquo is not a thane. Also, there is every suggestion that while he is a powerful general, he is not as powerful as Macbeth. King Duncan rewards Macbeth, not Banquo, for service.
However, Banquo is "greater" than Macbeth because he is both smarter and more grounded in his principles. Banquo does not trust the witches or their prophecies, which turns out to be the better judgement - it is trust in the prophecies that brings Macbeth down. Banquo immediately suspects Macbeth of the murder, knowing his friend well. He does not rush to seek out his own power, like Macbeth did, when the prophecies seemed to be valid. Finally, Banquo dies while trying to protect his son, encouraging Fleance to flee. Macbeth pays little attention to Lady Macbeth as she slowly slids into insanity and dies - he is too focused on himself.
To the above answer, I would add only that the difference between Banquo and Macbeth extends beyond present circumstances. Macbeth's dearest wish is to gain the throne for not only himself but for his heirs as well. The idea of getting it only to pass it on to someone else's family is infuriating to him (one of his motivations for murdering Banquo is that he does not wish to send himself to Hell just to benefit another's family line).
However, when Macbeth presses them, the witches tell him that this is exactly what he is going to do. Banquo will be "lesser" than Macbeth in that he will never himself be King of Scotland -- in fact, he's nothing but a corpse in a ditch. However, his heirs are destined to become kings of not only Scotland but of the England of Shakespeare's time. Remember what the witches show Macbeth in Act IV, scene 1, Macbeth's second and last interview with them:
A show of Eight Kings; the last with a glass in his hand: Banquo's ghost following.
Macb. Thou art too like the spirit of Banquo; down!
And yet the eighth appears, who bears a glass
Which shows me many more; and some I see
That two-fold balls and treble sceptres carry.
Horrible sight! Now, I see, ’tis true;
For the blood-bolter’d Banquo smiles upon me,
And points at them for his.
"Two-fold balls and treble sceptres" are the sign of ruling both England and Scotland.
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