Paypal buying eBay items wasn't actually the primary method for stimulating growth. Initially, Paypal offered new users $20 for opening an account, and $20 for referring somebody to open an account. They then dropped the bonus to $10 for both, then $5, then $0. This allowed them to grow immensely, and they reached 100,000 users in one month. These bonuses weren't "cheap" though: they cost PayPal around 60-70 million.

Here's a reference - an interview between Elon Musk and Salman Khan: http://www.youtube.com/watch?v=vDwzmJpI4io&feature=player_de.... It's worth a watch.