PayPal could probably handle your questions better than we can, but essentially PayPal works in one of three ways:

1) You use them as a one-time service; they (PayPal) withdraw money from your credit card and pay that money to the vendor (BYOND). I personally prefer using them in this fashion.

2) You create an account with PayPal and link a credit card to that account. You call an automated phone number to verify your card. Now, whenever you want to pay money to someone online, you choose the PayPal option and the money will automatically be withdrawn from your credit card. The problem here is that your account is only as secure as your password, so people who guess your password can start buying whatever they want using your credit card.

3) You create an account with PayPal and instead of using a credit card, you link it directly to your bank account. Now you can use PayPal as a debit account instead of a credit account. I believe international customers must link a bank account to PayPal in order to make PayPal able to prosecute in the event of fraud, but you can still use a credit card instead.

I used to have an account with PayPal until someone gained access to my account and used my PayPal account to buy $140 worth of software on eBay. I suspect that one of the sellers I bought an item from somehow retained my password and account through their external checkout, then sold that information to someone else and was caught in the process. eBay/PayPal were entirely tight-lipped about how the account was compromised. (I did find it hilarious that they suggested that I could have fallen for a false domain name/phishing email. I'm way too smart for that.)

Now I just use them on a one-time basis whenever I need to buy something -- I just enter my credit card number and my information over a secure connection whenever I want to buy anything. Short of having a key logger trojan on my system, there's no way that can be compromised.