First you need to prepare your paypal account. Visit this link first to get started - https://cms.paypal.com/cgi-bin/?cmd=_render-content&content_ID=developer/EC_setup_signature
After you configure Paypal, you will need to configure your store.
Visit http://www.yourstore.com/storesetup.wws and click the payment tab.
Scroll down to the paypal section and you will see the area to choose which method of paypal checkout and the fields api user, pass, and signature.
That should do it!
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