Geek to Live: Send and receive money with your cell phone
In a nutshell:

Once you enter your cell phone number in your PayPal account and set up a mobile PIN (separate from your account password), PayPal's voice robot calls your phone on the spot and asks you to verify the PIN. Once the PIN's matched, your phone is PayPal-enabled.

Then, to send someone else's phone $5.50 in cash, text message PAYPAL (729725) the message send 5.50 to 7185551212 where the recipient's phone number is (718) 555-1212.

PS: The image of the phone in the article reminds me of this one;)

See also:
"Mobile PayPal" kommt auf den deutschen Markt: Zum Thema "Mobile Payment" auf der Augsburger MCTA 06
Arbeitsgruppe Mobile Commerce
7. Konferenz Mobile Commerce Technologien und Anwendungen (MCTA 2007)