The only negative experience I've ever had using ebay was recieving a DOA motherboard, which was promptly refunded. I'm always careful about who I buy from. I want to see numerous transactions and at least 98% positive feedback. And when in doubt, I'll even look at the negative feedback to see what the problems were.
I also never use any method of payment other than paypal unless dealing directly with a reputable business... And even then only using my debit card. Between paypal's security policies and my banks online protection, I have recourse should things go south.
And always always always make sure your transaction is at least 128 bit encrypted! Nothing online is completely secure, but a little research and safeguarding goes a long way. Cover your butt!
@AmiBoy
Do check with your bank to see what recourse you might have in this case. Check into reporting this incident to proper authorities as well, since this is not the first time this has happened. This IS a federal offense in most countries.