PayPal is the middle man between your bank account and the seller. You pay with PayPal and PayPal takes the money from your bank to pay the seller. And vice versa of course.
The benefit is that you do not have to give the seller your personal credit or debit card details to make the transaction as PayPal will pay the goods/services for you on your behalf and deduct the money from your bank account itself.
PayPal is not a bank itself but if you have money put into your PayPal account you can transfer it to your bank account when you want. PayPal does charge a small fee for doing this but PayPal is a commercial business.
You give your PayPal account the necessary bank details and to make it more secure PayPal will ask you to verify your address and bank account so you are legitimate.
If the seller has not verified his bank and address PayPal will show this as unverified when it comes to paying so you can make a choice whether or not you wish to continue with the sale.
PayPal is owned by Ebay.
To make an account you need a personal bank account and a fixed abode address and debit or credit card.
Go to the PayPal website: http://www.paypal.co.uk. (UK site) but your enquiry comes from Yahoo India and PayPal I think have suspended PayPal use in India. But the issue may of been resolved by now. See http://news.bbc.co.uk/1/hi/world/south_asia/8511553.stm
But you can go the PayPal India website at: https://www.paypal.com/in