Paragraph spacing is influenced by two methods: Line spacing, which sets the vertical spacing between lines that make up the paragraph, and inter-paragraph spacing which sets the spacing (padding) between each consecutive paragraph. Using the latter avoids poor formatting techniques such as pressing the Enter key between paragraphs to create "padding".
Leading determines the distance from one text baseline (the line on which a line of text appears to sit) to the next.
The main leading control is in the Paragraph panel, and on the context toolbar. Using this is recommended, because it can be applied to the entire paragraph and so keeps the paragraph consistent. Leading Override can be used when you have a handful of characters that need special handling, for example, because they use a different font with a size that looks visually different.
Inter-paragraph spacing settings allow you to precisely determine the offset between a paragraph and its preceding and following paragraphs.