I read in the NYTimes that Paypal supports two-step verification, but I can't see where to set it up. How do I set up two-step verification in Paypal?
It's done in your settings:
You can either pay for a physical token that will display your one-time password (OTP) key, or you can register a mobile phone, the instructions are right there.
Note: to register a phone it needs to be able to receive text messages, as that is how the OTP is sent.
I didn't have it yet on my account so here's how I did it. The correct name of the product is
Enjoy your two-step authentication aka "Security Key"