The PayPal Security Key adds a second factor to the authentication process for your PayPal account-something you have. You prove that you have this Security Key by appending the 6-digit code shown on the key to your normal PayPal password, which is the "something you know." Note that the number on that key changes every 60 seconds.

This is industrial-strength authentication. As someone who has worked in the Network security industry forever, I can safely say SecurID-the technology behind the PayPal Security Key-is considered the gold standard. Road warriors employed by major corporations carry a SecurID card to log into the corporate VPN. I have to use this key to get on the VPN and validate myself to the corporate helpdesk for certain tasks (e.g. password changes).

The hardware keys normally cost around $50 a piece. PayPal is quite literally giving these tokens away. It's a good deal that any PayPal user should take advantage of!