I have used PayPal extensively over the past 2 years, and have never had a problem. It does not guarantee that you will not get ripped off, but it does minimize the risk. I use it mainly with Ebay (Ebay actually own PayPal now), and once you buy from sellers with good feedback, then it works well.
It's main function is to minimize risk to sellers from credit card fraud. It does not really have any major protection for buyers.
There is a way to access funds sent to you through PayPal by setting up a non-resident US bank account with a mastercard debit card. Basically, you can withdraw the money to your US account, and then use the Mastercard like a credit card to utilize the funds. I read somewhere about setting this up relatively cheaply, but I cannot remember where. It may have been on boards.