No wonder: the Skype handle of the sender was not added to the PayPal payment notification. Without that, there is no way to match a payment to a specific Skype user via API.
Discussed that with the PayPal guys over at DevCon in Chicago last year without getting a solution.

It would have been perfect for buying PamFax credits...
But useless without a working API.

Now that you're not using it any more, are you able to provide the url's you were redirecting Skype users to on the PayPal site?

Too bad! Receiving and sending money via paypal using skype was more than convenient. Not enough users to reach the break even point, however I need to look for something to replace it and I think this service will grow in the future...

It sad to know that I havent tried this service before I found out that it was shut down. Well I have to use paypal service still for my online transactions.

I am personally very happy about this. There is a growing tendency for Skype to become hugely bloated with features I never use. If I want to send money, I will use PayPal.

I congratulate you for the decision to focus on quality rather than quantity of features.

Suggestion: When you decide to discontinue a Skype feature such as this one, here's the options for how to deal with it in your online Help:

Best: Add a help topic stating that it's discontinued.

Almost as good: Remove old help pages that tell you that it DOES exist, when in fact it doesn't.

Worst: Leave old [Send Money] help pages there with no mention of it being discontinued, so that users of Skype Help waste their time chasing info on an EX-feature . . . .

I'm usually happy with Skype, and I think this (and my earlier reply to "Was this help topic useful?") are the only times that I've actually submitted a gripe.

@lbatfish thanks for the feedback - I’ll pass it on to the guys who deal with the Help pages.