An Offer of Overpayment From a Scammer?

Go with your gut feeling. You really don't need our opinions. Of course something is fishy here. Who in their right mind would offer you $300 for something you are selling for $175? I'm sure it's a nice camera... but let's think about this for a second.

(second)

Something's still fishy!

Stay away! Even checks that have cleared can be returned.

I wasn't asking if it's a scam. That's obvious. I'm asking how it works? I've never used paypal.

You never really asked that question. But if you really want to know: you ship the camera and a check for the overpayment, he retracts the payment to you. You get nothing. He gets the camera.

From Wiki (and i think you can interchange "check" with "Paypal payment" in the first method):

Craigslist
The popular online classifieds website, Craigslist, has been plagued with scammers using advance-fee fraud and similar techniques, usually involving fake checks, to con people out of their money. Sometimes many scammers contact a person who is either attempting to buy or sell items on Craigslist, and attempt to perpetrate the exact same scam. Many of the same elements as the Nigerian 419 scams are used often on Craigslist, including persons conducting transactions from outside the country, sending realistic looking bank checks, sending more money than is owed, and requesting that money be wired back to the scammer.^[42][43]
Another advance-fee method that has been used recently on Craigslist is where the scammer will contact someone selling an item and ask them to ship the item to a location outside the US, then provide the tracking number for the shipped item in exchange for payment. The seller then sends the item and provides the tracking number, after which the scammer never provides payment. Sometimes the scammer will approach someone offering a room or apartment for rent and pose as someone moving in to their area from overseas. They will create a scenario in which they are pressured to secure the room in advance, and ask if they can secure their occupancy with a deposit. The deposit check that they send will be a fake check for far more than the amount requested for a deposit. When the check arrives, the scammer will ask for a refund of the difference between the check they sent and the agreed upon amount. The fake check will bounce and the victim has lost whatever money they "refunded" to the scammer.

But isn't paypal a direct payment into my account? That's the part I don't get? How can essentially a wire transfer bounce? (I'm sure everyone else but me knows this).

The other thing to watch out for with Paypal is the chargeback scam (where they wait until the item is in the mail, then claim they never got it and get Paypal to refund the money back out of your account), but if that's what this person is trying to pull off he probably wouldn't offer more than you're asking.

Steve, I'm sure there are lots of ways; these scammers seem to be very slick. The most straightforward that I can think of them using PayPal against folks like us is a non-receipt claim, like Jerry said... which PayPal seems very likely to resolve in favor of the buyer. Most likely though, is that they ask you to wire the overpayment and then they get that in a non-retractable manner.

But isn't paypal a direct payment into my account?

What PayPal can put directly into your account they can also pull directly from your account when the payment is determined to be fraudulent (e.g. funded from a stolen credit card). Read the PayPal user agreement carefully, particularly the section about chargebacks.

Also, there is a very good possibility that this is actually a phishing expedition to steal your PayPal account info. He asks for your PayPal email address, you receive an email from PayPal (not really, it will be fake) telling you that you have cash waiting to be claimed, and in that email is a link to complete the transaction. If you click the link instead of going directly to PayPal and logging in, it will send you to a fake login page that looks legit but isn't. Once you enter your email and password on the fake page your PayPal account will have been compromised.