From Paul Gil,
Your Guide to Internet for Beginners.
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Answer: PayPal is as safe as any online bank.

Although no system is 100% foolproof, PayPal has designed many checks and balances into its system to keep errors and fraud to a bare minimum. You won’t find another online financial institution that’s better at protecting its customers than PayPal. By utilizing the very latest in secure technology and employing a large team of experts in all areas of online safety, PayPal continues to be a leader in safe online payments around the world.

1. PayPal is guaranteed against fraud and identity theft. PayPal guarantees 100% protection against unauthorized payments from your account. Every transaction is confirmed by email to the PayPal account holder. Any transaction you wish to dispute will give you access to a 24/7 support team of analysts who will sort out your problem for you.

2. eBay purchases can also be insured up to $1000 through PayPal. A service called "PayPal Buyer Protection" is another way that PayPal will certify that certain sellers are trustworthy.

3. PayPal's Anti-Fraud Team works 24/7 Using sophisticated risk models and advanced technology, the team is able to detect, and often predict, suspicious activity to help eliminate identity theft. The anti-fraud team’s sole job is to make every PayPal transaction as safe and seamless as possible.

4. Many other PayPal safety measures distinguish the service from its competitors. (More technical details on PayPal safety are available here).

Next: How do I get started with PayPal?"