I use it all the time too, more now for non-auction items than auction items. Go to "Send Money", and when you enter their email address and go to the next page, you will see their reputation next to their name. As long as it's +10 or so, you don't have much to worry about. I've never been ripped off via PP, but have read many reviews from people that were and got their money back. I also agree on having them send a scan of their DL - I've done that with larger purchases.
I have even used PP with friends, and for local stuff on craigslist. You can pay someone a large sum of money right there on the spot, and put it on a credit card.
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