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PayPal is a company that allows money to transferred using the internet. This is a much faster method than using checks or money orders. Money can be transferred from any person who has internet access from any part of the world. The money is actually based in the U.S.A. though.
You can transfer money to your PayPal account from your checking or savings account. You can also add money using MoneyPak. Just go to any of the following stores with your cash and get a MoneyPak: Walmart, CSV/Pharmacy, Kmart, Kroger, Meijer, RiteAid, or Walgreens. You can then use the MoneyPak to transfer the money to your PayPal account.
Once the money is in your account, you can transfer it to anyone else with an email account, even if they don't have a PayPal account. PayPal will automatically create an account for them under their email address.
If you want to sell or buy on eBay, then having a PayPal account will make it much easier. Many vendors on eBay will only accept PayPal payments for goods.
PayPal has many weaknesses and problems that you should be aware of. The main one is that a buyer may make a claim and get his money back. This can often be difficult to contest and will almost always require you to go to small claims court to get money for something that you sold to someone.
PayPal policy will not cover virtual items. So if you sell a virtual item to someone and that person receives it, then files a complaint, then they may get their money back without even being obligated to return the item they bought from you. This includes things like hosting, subscriptions, domain names, virtual gold, and anything else that is intangible.
For a list of all the problems with PayPal, Google "PayPal Sucks".
For this reason, it is often best to use PayPal when dealing with reputable companies and agencies. I have used PayPal for over five years without any problems.