Back in April it was announced that PayPal would be integrating with Android Pay so it could be used as a payment option when you are using Android Pay at a retailer. That integration now is starting to show up for users. In the latest version of the PayPal app, you now have an option in settings to link the two payment services together. This then allows you to select it as your payment option when you are at a retail pay terminal.
The feature is rolling out now and is a combination of an app update. You need to make sure that you have the latest build of the PayPal app, version 6.12.0. If you have that and still don’t see the update, it is a matter of it being server-side loaded to your account.