Originally Posted by Kyanite
In order actually pause, you have to be playing an offline game. That has to be set before you begin the game.
To clarify what this guy said, it's because even if you're playing by yourself, the default settings start an online game, as someone can randomly drop-in to the game if they choose to (hence 'online drop-in co-op' being a feature of the game). When you're on the main menu, if you hit
(I think it's
), it changes from an online game to a private online game. Hit it once more and it changes to an offline game. You should be able to pause in this mode.
Alternatively, if you choose 'custom game' instead of 'new game', you can pick "local mode", which obviously isn't online and so allows you to pause. Picking 'custom game' also allows you to set the difficulty, thus making going for certain achievements easier!