PayPal is in talks with Google to add PayPal as a payment method for the Android Market. Apparently Google wants to make paying for apps as easy as possible for Android users so they can start shifting apps. As it stands, you can buy apps through Google Checkout and sometimes using carrier billing.
Both options are fine, but not popular. Using PayPal as a payment option would likely open the flood gates and move a ton of apps. On the other hand, PayPal currently powers Blackberry App World, illustrating the point that no matter how easy it is to buy apps, people still need good apps to buy.