PayPal’s Security Key, Not So Secure?
Seems that PayPal’s security key isn’t necessarily so secure.
[A] user discovered a bug that makes the key useless in certain situations. By entering his valid PayPal login and password, answering a security question and entering ANY six-digit number, he can make a purchase.
It is important to note that that PayPal and EBay have not been able to reproduce the error – but Chris Romero notes that PayPal still requires him to enter a valid user id and password and answer a security question so I don’t think everyone should get scared.

I have one, and it works fine for me. Nothing is 100% bug-free, but I’m still confident this provides more security than just a username and password alone.