Gary Price quotes a Wall Street Journal article that reports that Google is working on a PayPal-like payment system called Google Wallet.
If you can't get to the subscription-only WSJ article, there's also an article on Reuters.
A curious move by Google but, no matter how you look at it, it can't be good news for eBay's PayPal service.
See also my previous posts, Google vs. eBay and Google and eBay pursue sellers.
Update: Some good thoughts on Google Wallet over at TechDirt.
Update: There now is coverage of the story in several newspapers, but none of the articles expand much on the Reuters article.
Update: John Battelle quotes analyst Safa Rashtchy as saying that Google not only will be launching a payment service, but also will be launching a sophisticated "listing product" that is "similar to Craigslist but much more powerful."
Update: Charlene Li speculates that Google is going after micropayments.