During the initial phase, Gbuy is expected to be free however merchants may eventually be charged 1.5 to 2 percent per-transaction as a fee for the service. This fee is slightly less than eBay and would certainly help to convert Papal users and further increase competition between the two Internet giants.
The system allows Google to gather data when users click on a merchant's Gbuy feature. The consumer is transferred to Google's Gbuy site, where they complete the transaction.
The benefit to Gbuy merchants is the ability to monitor which paid-search results users click on and which ones turn into actual sales. This aspect is especially important to internet advertisers interested in which categories bring the highest return on investment (ROI).
Merchants already involved in Gbuy's beta test are set to launch on June 28th. No further information has been released as to when Gbuy will be available as a public beta.
As someone who has used Paypal in the past, I can say that there is room for improvement. Paypal is by no means a bad service, I currently use it for my girlfriend's online store. There are certainly additional features that Google can bring to the table, that may increase Paypal's need to innovate.
When Gbuy is finally released to the public, I will be waiting to test it out.