Beacon, a dongle that plugs into a standard electrical outlet, uses Bluetooth to communicate with retail point-of-sale systems from the likes of NCR and Micros (both of whom are PayPal partners), as well as to automatically check in store visitors who have downloaded a PayPal (EBAY) app on their smartphones and opted in to the system.
PayPal foresees Beacon enabling in-store promotions, payments that require nothing more than verbal confirmation (a user is sent a receipt later), and the potential for retailers to act behind the scenes (one example: a drugstore filling a user's normal prescription after he/she walks in).
To address privacy issues, PayPal users are able to decline a check-in immediately after walking in, in which case no info is shared.
Square is trying to address this space via Pay With Square, but its solution isn't as seamless (yet).
Beacon has the potential to address a frequent complaint levied at PayPal's current card-free offline payment solution, which requires typing in a phone # and PIN: that it simply isn't as convenient as swiping a credit/debit card. However, old habits often take a while to change.