Working With PayPal Instant Payment Notifications (IPN)
PayPal instant payment notifications (IPN) are payment-related messages sent from PayPal to the merchant's own website. When setting up IPN, the merchant provides a specific Web-page address (URL) to receive the messages. The merchant then monitors that URL for the IPN messages. This service is not necessary, but it can be helpful in managing sales activity and improving customer service and fraud prevention.
Types of Messages:
PayPay IPN can dispatch a variety of different messages to your website. Examples include payments, refunds, chargebacks, authorizations and product subscriptions. These are called "events." Once an event occurs, you can then take action based on your own business policies. For example, you could use the messages to add to your customer database or send a note to order fulfillment to prepare a shipment on approved purchases.
Setting Up IPNs:
Setting up PayPal instant payment notifications is complicated. You can see a sample near the bottom on the "Introducing IPN" page (see Sources). You should also look at the "Code" page linked to below for more samples of instant payment notifications for PayPal payment transactions.
You should always test a new IPN before activating it on your actual website. You can do this first through the PayPal Sandbox system. To test on your actual website, PayPal recommends pre-funding a PayPal account and charging as little as possible. However, you can always just issue a refund after running a test on your actual system.
For fuller details on PayPal IPN, visit the guide linked to below. It will show you how to implement an IPN listener to receive messages, set up fraud detection and other features.