Google announced yesterday that it is extending its free transaction promotion for a full year, until the end of 2007.
And while everybody should know that Checkout isn't a direct competitor to PayPal--the former is a small business transaction processing service, while the latter is a direct payment system--Google's promotion will put pressure on eBay. PayPal matched the free Checkout offer when it was first announced, but that promotion ended in November. PayPal charges 2.9 percent plus 30 cents per transaction on sales up to $3,000 a month.
Basically, Google has a greater incentive to drop fees: It'll make up losses through advertiser volume. Plus once you're in the Google system, you're more likely to use other Google services.