Chief,
I've had really good experiences with PayPal myself. I've bought and sold on eBay and other sites using PayPal to pay with. One thing you can do is set up a PayPal secure "credit card" that is only good paying through them. Makes it nice that you don't put your personal number out there on the net.
The way it works is you set up and account and how you are going to transfer funds to PayPal. I have mine set up with a credit card (for "emergency" things) and my bank account. When you pay with PayPal, you basically tell PayPal where to get the money from and they pull it from your account and send it to the person you are paying via their PayPal account. Basically, it's a EFT (Electronic Funds Transfer) service to make small payments more efficiently between users. It made eBay even more popular.
I've used it for eBay, selling products to friends, buying products on other sites that take paypal, and sending money to someone instead of using Western Union.
Receiving payment is easy as well. PayPal basically puts the payment in your account. You can do one of three things, use the money for PayPal transactions, or have them cut you a check sent in the mail, or transfer the money to your bank account.
The only fee I've encountered is for a check mailed to you instead of a direct deposit to your account.
I did have a compromise of my account one time about 4 years ago, but PayPal made everything right and did not take too long to do it. They are enhancing their security all the time which is a good thing too.
I've been using PayPal for several years now with no complaints. I'm using it to take payments for my book and will let you know if there are any problems there.
I'm sure someone will have a horror story, but my experience has been great.