A big audience to consider with PayPal is teenagers who may not have their own credit card. Parents could set up a PayPal account to let kids purchase things online (Without having access to their CC#). Or if a kid doesn't have a CC, they may use PayPal as a means to order products/services that require a CC. I know when I was in early high school I used PayPal when I didn't have a credit card to order records and cds. That could be why Apple accepts it.

I see, but it's possible that they accept PayPal but don't use them to process the credit card charges. I always wondered how big operations like iTunes do their credit card processing.

Yea definitely. I wouldn't think Apple would use PayPal to process the credit card charges. I was just explaining why they might accept it as a form of payment.