There is actually a link (often with the paypal badge) when you go to check out on ebay. When you click on the paypal option it will take you to a page where you log into your paypal account and approve the amount and add your shipping information for the seller.

The nice thing about using PayPal when you purchase on Ebay is the fact that PayPal offers a Buyer Protection service that protects you in case the seller is not legit.
Source(s):
http://pages.ebay.com/paypal/buyer/protection.html

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If you set up a paypal account first, you are usually directed to it after you click on PAY NOW on Ebay, if the vendor uses paypal as a payment method, which most of them do.
Go to paypal.com to set up an account
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Most eBay users use PayPal, as it leads to more secure buying and selling.

You create an eBay account, and you can link that account to your PayPal account for ease of purchasing. There might, theoretically, be occasional purchases that can't be made with PayPal, but I've never ran into that issue.

Here's what eBay says about PayPal, encouraging people to use it: http://pages.ebay.com/paypal/buyer/

So, in summary, create an eBay account and then link it to your PayPal account. If it doesn't guide you to do this easily, you can go to "My eBay" in the top right, and select "Summary." Then, click on the "Account" tab to see all of your options in using PayPal with eBay, including linking the accounts (what I did.)

My only problem answering this is I'm not buying something on eBay right now and I take my use of Paypal for granted, so I don't remember the details of all the steps to set up the link. It's really easy!

If it wasn't Christmas eve, I would totally create an eBay account just to walk you through it, but this should be sufficient to help you out (and kudos to anyone who gives an even better answer.)
Source(s):
http://pages.ebay.com/paypal/buyer/
http://ebay.com (with log in to check things out)

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