I'm a PayPal merchant. First of all, I'm sure the choice of a payment service depends a lot on the specific nature of your business. I run a completely analog business, selling a gadget that I make at home, to a relatively small niche of enthusiasts, strictly in the US.

I do look around once in a while, for what the alternatives are, but so far PayPal is the only service that lets me run my business from a passive web page. I don't even have my own URL. Every other service seems to have a tutorial showing me what code to install on my server, but frankly hosting and maintaining a server (at home or in the cloud) seems like it would add a dimension of complexity to my business that I don't want to deal with. I certainly don't want to be responsible for handling and storing my customers' credit card numbers and similar data.

I also think that the customer protections are beneficial, since they give people the confidence to buy from a relatively unknown seller.

On top of that, they have a deal with the USPS that lets me generate a first class shipping label, which isn't even available at the USPS website. What I save on postage more than covers the PayPal fee.