Paladins are an invention of high medieval French literature, especially those chansons dealing with Roland and his exploits. They're also known as the Twelve Peers, and are, you guessed it, twelve highly esteemed noblemen who serve the (fictionalized) Charlemagne. In the most prominent of the chansons, they die with their leader, Roland, while defending Roncevaux Pass from the Moorish hordes.

That's pretty much it. There were no actual guys called paladins. Knights were not called paladins, except perhaps as a literary allusion. Charlemagne did not spend ten years campaigning against the Moors in Spain; he spent about four months there, before withdrawing his army to deal with domestic troubles. The historical Roland was a minor lord and killed not by tens of thousands of treacherous Muslims, but by outraged Basques whom Charlemagne's army had treated rather shabbily.

My guess would be that Gary Gygax or someone else involved in fantasy roleplaying games seized upon the name and built a player class around it.