My question is; are you using a strong password with a combination of numbers, letters (UPPER and lower case,) and special characters or was it the name of a pet, family members birth date, etc.? If was the latter then your Pay Pal account was probably easy pickings for a someone with a password cracker. It probably took them 30 minutes or less.

This is probably a good time to post some tips for creating a strong password from our friends at Microsoft for everyone out there. If anyone out there is using a weak password, Don's mis-fortune is your wake up call.

• Think of a sentence that you can remember. This will be the basis of your strong password or pass phrase. Use a memorable sentence, such as "My son Aiden is three years old."
  
• Check if the computer or online system supports the pass phrase directly. If you can use a pass phrase (with spaces between characters) on your computer or online system, do so.
  
• If the computer or online system does not support pass phrases, convert it to a password. Take the first letter of each word of the sentence that you've created to create a new, nonsensical word. Using the example above, you'd get: "msaityo".
  
• Add complexity by mixing uppercase and lowercase letters and numbers. It is valuable to use some letter swapping or misspellings as well. For instance, in the pass phrase above, consider misspelling Aiden's name, or substituting the word "three" for the number 3. There are many possible substitutions, and the longer the sentence, the more complex your password can be. Your pass phrase might become "My SoN Ayd3N is 3 yeeRs old." If the computer or online system will not support a pass phrase, use the same technique on the shorter password. This might yield a password like "MsAy3yo".
  
• Finally, substitute some special characters. You can use symbols that look like letters, combine words (remove spaces) and other ways to make the password more complex. Using these tricks, we create a pass phrase of "MySoN 8N i$ 3 yeeR$ old" or a password (using the first letter of each word) "M$8ni3y0".
  

from http://www.microsoft.com/protect/yourself/password/create.mspx

Cheers,
Bill