They have buyer protection for some purchases. Its a pain-free way of paying and getting paid just using your email address. I've been using it for years without a glitch.
imho I'd rather go with a site that has paypal over a site that just have creditcard options. Apart from steam you can use paypal to subscribe to things that require a monthly payment.
There is also part of buyer protections, used it once it was painless and got refunded. FNB's paypal where you can recieve payments is, but also are not great depending on the incoming amount. Be sure to check the handling fees VS Swift code's fees (taxes etc etc).
I can see the advantages of using it but haven't done so myself. I've used similar services such as Google's one (can't remember the name... Google Checkout maybe? Hmmm) and Moneybookers though.
I mostly pay online with a credit card or with that Google thing if it's available.
It means you only have to trust one vendor (Paypal in this case) with your precious CC details online rather than every Tom, Dick and Harry who may or may not be a fly by night operator who'll use your CC details you so conveniently entered on his site to pay for his next shopping spree. Yeah,I paranoid much.
I don't think you are paranoid... There are billions of dollars lost to fraud each year. And the large profile ones like the PS3 etc. just show that you can't be too careful, the less links that can be weak links the better.
I have used Paypal in several instances, and have found it rather useful. I bought online gold for my mmo's , sent money to people who bought me games I couldn't (credit card restrictions), and Ebay transactions.
PayPal rocks I has an account. You can buy stuffs online without entering your credit card details as well as accept payment from people without giving out your bank account details. I has used mine before most successfully I am still trying to fully grasp the whole bitcoin concept, it does however interest me very much.