You "bump" another phone if you don't have their contact info already. The app automatically sets them as the recipient of your paypal transaction (presumably without you having to save their information -- which allows "business" type transactions without filling up your contact list.)

It's a mental closure to the transaction like a handshake.

A gimmick that makes the customer feel like he just did something and gives him something to talk about when describing the transaction to a friend.

I don't see this. The times article says you do one of the two (and the app screenshot seems to confirm this).

It ensures you're "hip" and "get it". It means you're in the in crowd who know what 'bumping' is.

The rest of us just email/sms/anything less stupid sounding than "bumping". Really. It's right up there with microsoft Zunes and their "squirting".