Although their policy could have changed recently, historically the fee was only imposed on the person receiving the money, not the person paying it. Thus, if you bought something from someone for $100 using your credit card through PayPal, your card would be charged for the $100 purchase price. The person who sold it to you would only get $97.10, once the fee was debited from the transaction.
That's why some sellers add a PayPal fee to items they offer in the Classifieds. For me, I don't mind paying the fee as the price for the convenience of accepting credit card payments and for getting payment almost immediately.
K