Though Google Checkout is not a typical merchant service in that it doesn't allow businesses to handle card swipe transactions and functions similarly to Paypal and other online-only payment processors, it bears mentioning here.
Their transaction fees are fairly comparable to other credit card processing companies: the current going rates are as low as 1.9%+$0.30 per transaction if you do a very high volume of sales. However, if you are just getting started, working with a service like Google Checkout can help you to avoid paying setup fees. There also do not appear to be any "early cancellation" fees or contracts that can lock you in for two or more years as there are with other merchant service providers. You can also save some money on fees and receive additional benefits if you are advertising through Adwords while using Google as a payment processor.
Another benefit of working with Google is simply reputation -- the company is well known and well-respected, so potential customers will feel confident when they see a related badge on your website. Google Checkout also works for many, many stores, and some consumers will prefer to shop this way rather than having to input credit card information fresh for every purchase they make.
While this service certainly isn't going to put Paypal and other, more traditional merchant service providers out of business, it can be a good starting point for a new web store owner.