Initially, Paige was annoyed with Derek for showing off his physical prowess at sports, but he won her over by having a clever answer to her challenge. She challenged him to play any instrument in the music room if he wanted to know her name. He chose to play the triangle.
Not long after they started dating, Paige figured out that Derek was different. She knew he was supernatural, though not necessarily that he was a Werewolf specifically. She knew it was related to the strange things that happened around Beacon Hills. She loved him anyway.
Paige's body rejected the Bite from Ennis. Rather than suffer until she died from it, she asked Derek to end her suffering. He killed her on the roots of the nemeton by hugging her so tightly he broke her neck.