Please see Core Concepts - PayPal for a detailed discussion about this tag and its usage.
This parameter is used to set the image used as the button.
You can either choose to use an image of your own or you may use one of the buttons made available by PayPal.
Using your own image -
<cms:paypal_button image="<cms:show k_site_link />/images/my_button.gif" />
Using PayPal provided images -
To use these images, set the image parameter to a number ranging from 0 to 8.
<cms:paypal_button image='3' />
The numbers represent the folllowing images -
The generated button provides PayPal with a link to the page that will process the IPN sent by it. By default this will be the link of the page the button is located on. If you have placed the paypal_processor tag, that handles the IPN, on some other page, set that pages link as this parameter.
If the product being sold is not downloadable and requires a shipping address, set this parameter to '1'. This will make PayPal prompt the buyer for a shipping address.
This tag is self-closing and does not set any variables of its own.