I have used their service and it can't be faulted, BUT, there are others masquerading as Paypal.
Make sure you sign up to the genuine version (via ebay is as good as any, as Paypal is part of their giant organization) and they will send you regular e-mails detailing any scams.
As Willow12 said, their reputation is paramount, and they are seriously worried about fake sites destroying their business.
If anyone e-mails you asking for passwords and suchlike, ignore it and report it straight away to Paypal.
Please accept, this is not meant to be a frighten-er, but just an awareness message. Sadly we live in a world where everyone is not honest!