I have had first-hand experience, on behalf of numerous clients, with problems that can arise with PayPal and some of the crazy things PayPal do out of the blue and without reason (see sites like http://www.paypalsucks.com etc. for examples) and always suggest using other methods for anything but low cost products where a chargeback/dispute won't bother you (if you get 2-3 disputes in quick succession, PayPal typically freeze your account and all monies in it for 180 days and even if you jump through all the hoops they set thereafter, will in most cases not unfreeze your account for as long as they possibly can - which is very bad for cash-flow if you are a business).
Although low-cost products and small payments for web-services (which being intangible goods are not covered by PayPal seller protections anyway) may be less likely to incur problems with PayPal (especially chargebacks), mainly due to the buyers/users being less likely to complain over what are trivial or easy to resolve matters (e.g. shipping delays or miscommunication) and being more honest in general when compared to those in higher value transactions, I would always suggest using a merchant account or service such as protx for online payment processing and repeated billing.
These generally provide a better quality of service anyway, and when things go wrong respond faster, follow legal guidelines and regulations, and are more likely to fight for you than PayPal which will just cave-in and return any monies to the buyer/user on even the smallest issues and with almost no recourse to you or consideration of whether it is the right thing to do in the situation. To PayPal, it is about numbers and money and basically it is cheaper and in their interest for them to hand back money (your money, remember, not theirs) to buyers almost without any seller considerations than fight issues, whereas a merchant account has more legislation and obligation to protect you and will infact dispute chargebacks and other complaints if you so request. Also, unlike PayPal, they will not freeze your account or make other major demands that could affect your business, when customer related issues do occur (and eventually one will occur!).