Could Google Checkout go the way of Wave thanks to PayPal?

Now this is some interesting news that could have a very big impact beyond just the Android marketplace.

It seems that Google and PayPal have been talking and not about the weather. Scott Moritz at The Street has a report posted which lets us know about a pending deal between Google and PayPal that would see PayPal powering the payment system on the Android Market.

The two Net giants had been moving closer to an agreement in recent weeks. Now, sources familiar with the situation say the deal is all but sealed, with an announcement coming as early as Oct. 26 during the PayPal developers’ conference in San Francisco.

The move would not only help smooth a bumpy checkout system on Android Market, it would also bring Google closer to the type of seamless payment process that Apple manages at its iTunes and App Store.

The curious thing about this is that Google has its own payment system, Google Checkout, so one has to wonder why they would consider switching to using PayPal. Don’t get me wrong I personally think this is a great idea but one is left wondering if this is the being of Google Checkout heading the way of Wave, Froogle, and a number of other Google projects that have gotten mothballed.

I know I would love it if Google added the option for content producers to have their AdSense payments sent to PayPal instead of relying of Google sending to bank accounts or mailing out checks.