According to the Bloomberg article, neither Google or PayPal have commented on the story. In additon, the article goes on to say that the sources preferred to stay anonymous, "because the discussions aren’t public."
MobileCrunch notes that by Google allowing PayPal, "the Android Market will open up to a small portion of PayPal’s 87 million users — in particular, those without credit cards. Y’see, PayPal allows payments from savings accounts, where Google Checkout will only accept credit cards (and those weirdo debit/credit cards)."
EuroDroid adds that the addition "would make things easier, seeing as PayPal’s pretty much omnipresent in the online transactions world."
AndroidGuys mentions their opinion that "this is great news for users as a chief complaint about purchasing Android apps is that customers must have a Google Checkout account."
Image from AndroidGuys