a) You need to have an existing or sign up for new PayPal merchant account. Once you have an account read how to obtain the API credentials here. These are needed to identify your account
b) Open Admin -> Payments, select the “fees” mode and click on “FEES SETTINGS”. Insert your PayPal API username, password and signature. Next insert PayPal currency code (all codes can be viewed here) and activate / deactivate LIVE PayPal transactions. Sandbox = 1 means that testing payments are activated and no real money will be processed. Sandbox = 0 will activate live payments. Finally set your website currency and currency placement ($5 / 5$). If you are VAT registered there is an option to set and charge companies VAT. Save the settings afterwards.
All payment modes use the same PayPal credentials. FEES and PACKAGES have both custom settings where you can set your prices and options.
Potential issues: Use LIVE PayPal credentials with LIVE mode (PAYPAL SANDBOX = 0) and SANDBOX credentials with (PAYPAL SANDBOX = 1). One cannot use LIVE credentials with SANDBOX and the other way around. Also make sure to enter valid currency as it is common that PayPal reject the connection due to the currency problem.