There's a very interesting interview with Scott Thompson, CTO of PayPal, over at CNET. They go over the future of PayPal, their stance on Google and, a topic that has fueled enormous amounts of controversy and anger through PayPal phishing. They go over the existing state of PayPal security and potential improvements, such as key fobs, which they recently introduced as a downloadable app. Apparently, they weren't so sure people would even go for that at first but it seems to be making an impact:

The uptake on that has been surprising. You never know when you launch something like that what the average customer might do. We have exceeded our estimates of what the uptake was going to be. Almost immediately after receiving the fobs, more than 50 percent of all the people who received the security device activated it immediately.
Later, he claims PayPal is founded in security and privacy. That's interesting, considering the lawsuits and privacy issues that have arisen as a result of data leaks and account compromise. He also comments on Google Checkout, which entered the market not too long ago as a PayPal alternative. It's a good read, especially if you are a PayPal user.