What’s the difference between using paypal in your shopping cart and using your merchant account?

cost aside…
your merchant account only processes credit cards while paypal does that plus, it can transfer funds immediately from your client’s paypal to yours.

Basically, the difference is that you are using paypal as a merchant account. Paypal facilitates online payment by several different means, people can use credit cards, their bank accounts etc. People pay paypal, paypal pays you. This works similarly to a merchant account where people with their credit card pay the merchant processor, merchant processor pays you. Whereas in this case, merchant processor takes money from the issuing bank of the end client.

You can use both if you had a good programmer or a shopping cart that allowed that, giving your end-users options to pay by paypal as well as using VISA/MC/AMEX/Discover. It is entirely up to you. You will pay different costs I’m assuming, while your merchant processor has a rate for that, paypal has different rates.

If you only want to use one or the other, weigh the rates, see which one costs you less and use that.