Paypal

CiviCRM recieves contributions from two pipelines

Users enter the donation pipeline at a banner, gateway, email, etc and are directed at donate.wikimedia.org. There they are given the option of donating by paypal or by credit card.

Web Checkout

Once a user selects paypal they are redirected to paypal servers who will serve the rest of the request. Upon successful completion the donor is redirected to a Wikimedia thank you page.

Under the hood the following things happen:

1. PayPal internally processes the transaction and pushes it to their IPN service.
2. IPN pushes the contribution to our gateway at the following configured url.
3. We check the structure of the contribution and if everything looks ok we resubmit it back to paypal as a verification.
4. Upon a successful verification paypal responds with the the 'VERIFIED' string and we insert the contribution into civi.

All relevant code for this is present in the fundcore paypal module.