Paypal provides little more than illusory obfuscated security for those worried about typing in their card numbers.
That's just plain ridiculous. Paypal offers fairly secure online CC processing to smaller vendors, which should make customers feel a little safer: with traditional CC processing, the customer sends his CC info to the fly-by-night vendor, who then sends that to the CC processor. With Paypal, the customer gets directed directly to Paypal's site, where they enter their CC info (using an SSL encrypted session). The big difference here is that the only entity you're trusting with your CC info, as a customer, is Paypal: the fly-by-night vendor never sees your CC info at all, they just get the money in their PP account. Obviously, no company, even a big one, is perfectly safe and trustworthy, but I trust Paypal a lot more with my CC info than some random little vendor operating out of someone's house. When was the last time you heard of Paypal getting hacked or peoples' CC info getting leaked from there? If it does happen, there can be serious repercussions to Paypal.