Fortunately, PayPal have been developing a payment solution for Android called Mobile Payments Library which they just announced. Android developers can utilise the library to integrate PayPal payments into their applications. With the help of library, the end users will be able to make purchase transactions without ever leaving the application. The main benefit for developers, is that PayPal takes care of those nasty legal and security issues.
Of course, PayPal's solution is still a third-party solution, and inherently not as good as a seamlessly integrated native platform solution like the iPhone's in-app payments system. I hope that Google will address this issue in very near future by providing a proper Android mobile payments service and related API(s). Meanwhile, I think that PayPal's technology provides a viable solution for those Android developers that are not able to deliver paid apps via Android Market (like us living in Scandinavia).