yes. paypal only works for payment when it is linked to a credit/debit card or bank account.
you need to link your credit card to paypal. paypal verifies your card by placing a holding amount on your card (book keeping (ledger) entry that is pre-recorded before the transaction actually takes place). then you need to check your credit card statement. it helps if you have ibanking. if not, i'm not sure how you can check this. on the bank statement, there will be an entry of the paypal holding charge (amounting to usd1 or 3) and a code. enter this code into paypal. your card is then verified and the holding charge is removed.
then you need to link your paypal account to your ebay account. i cant remember how to do it but i'm pretty sure there is some kind of instructions u can follow.
you are protected under ebay buyer protection when you make payment using paypal. for this to happen, you need to WIN the bid. you will be covered for the amount and item that has been specified in the bid that you have won. after the bid has been won, and the seller tries to pull stunts (ask you to pay more money, etc.), it will be OUTSIDE the coverage of buyer protection. if you did NOT win the bid and then the seller offers you the item outside of the bid, he will circumvent buyer protection as well.
so basically make sure you only pay for what has been specified in the bid (which you have won).
in the event that this process breaks down, and you are within buyer protection, you must lodge a dispute within ebay.
all this is off the top of my head, but i'm sure you can find a more comprehensive and accurate description of everything on the respective sites.
i've made many purchases off ebay, but have never sold anything. selling on ebay is very troublesome, especially if you want to do it internationally. it is obvious that the higher risk is faced by the seller, not the buyer.