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What some scrupulous seller's do is send the money off to another PayPal account (to a different account owner), where it's then removed by the other PayPal account holder (usually with a different name).  The seller's original accounts where they accepted the funds will most likely not have any bank accounts or credit cards linked up.   

As what alvin5454 has mentioned, is incorrect.  Only if seller has money in the PayPal account - will it then be refunded to the buyer - most reputible sellers have money sitting in the cash position of their PayPal accounts.   I had a fellow collector, friend, bought an item on eBay for which he did not receive the item.  They went through PayPal to make the claim.  PayPal informs my friend that the seller had no funds in the account.  And that PayPal was going to try collect the refund - ONLY if they are able to get the funds from the PayPal account holder.   Anyhow, to this date, he's never seen his money back.   And it still shows up on his PayPal account as a claim outstanding.  I said to my friend, say good bye to your $300.  It's already been 6 months, and no money. 

Coinsplus:

With all due respect, please do not simply dismiss my posts out of hand. It is very annoying. I do not make posts frivolously or without knowing the facts.
You, in your post citing me, are incorrect.
Paypal protection is now not based on what is in a seller's account but it is a Paypal promotional tool. Paypal will make a refund if an item is not received if you have paid for it through that service. Check the terms and conditions.
Paypal changed the policy of refunds only from sellers' accounts long ago.
Paypal (owned by ebay) generates more business by providing that revised service.
However, the price for the protection is steep and it affects us all.
That's the price we all pay when fraudsters such as this seller registered in Australia perpetrate their crimes.
I know. I was a victim about a month ago of what appears to be this seller. When contacted, Paypal had my refund back into my credit-card account, with no services charge, in about three days.
I don't like ebay's "final valuation" rates, nor do I like Paypal's charges to transfer money to my account, nor do I like Paypal's foreign exchange rates.
I do like paypal's buyer protection plan.

Hi Alvin5454,

I apologise.  We are both partially right.   My friend did two payments via PayPal to a seller, one from his cash balance and the other partial payment from his credit card using PayPal.  He's out on his cash balance because Paypal does not cover two PayPal payments to a seller for the item purchased.  It has to be one single payment via PayPal.

ie.  Pay for the full amount of the item with one payment. Items purchased with multiple payments are not eligible. 

In any event it's always better using credit card payments via PayPal because of better buyer protection than PayPal's lengthy back and forth e-mail claims and explanation.  PayPal also knows this, but doesn't like this, as per their policy:

Relationship between PayPal’s protection programs and Chargebacks. Credit card Chargeback rights, if they apply, are broader than PayPal’s protection programs. Chargebacks may be filed more than 45 days after the payment, may cover unsatisfactory items even if they do not qualify as Significantly Not As Described, and may cover intangible items. You may pursue a Dispute/Claim with PayPal, or you may contact your credit card company and pursue your Chargeback rights. You may not pursue both at the same time or seek a double recovery. If you have an open Dispute or Claim with PayPal, and also file a Chargeback with your credit card company, PayPal will close your Dispute or Claim, and you will have to rely solely on your Chargeback rights.

If PayPal does not make a final decision on your Claim until after your credit card issuer's deadline for filing a chargeback, and because of our delay you recover less than the full amount you would have been entitled to recover from the credit card issuer, we will reimburse you for the remainder of your loss (minus any amount you have already recovered from the Seller).

Before contacting your card issuer or filing a Dispute with PayPal, you should contact the Seller to resolve your issue in accordance with the Seller’s return policy as stated on their auction or website.

Just an update on my part of this story. I never received the note from the seller. Seller was a phony as suspected.  Luckily I payed through PayPal via credit card so I was reimbursed in full.