Google Checkout is not exactly a big way to make money on Android. Developers are forced to use it, and their customers as well if they want to buy apps. And on top of that, Google Checkout doesn't even work in as many countries as Paypal – only 29, compared to Paypal's 190. This has been mostly Google' fault for not caring too much about Google Checkout to expand it.
But now they have to offer Paypal to developers as a real way to make money in the Android Market. And it seems they will do just that. Paypal will announce on October 26th, at the developer conference, their deal with Google.