The choices you have for a PayPal checkout are local and remote. Local checkout makes use of PayPal Payments Pro. You will need to sign up for this service with PayPal. Once you have signed up for this service you can request your API credentials. It is these credentials that you will use in the wizard when prompted.
If you would not like to offer the credit card processing for your checkout and just the PayPal Express Checkout then you can remove the form for the credit card and shipping info on the checkout page. If you do this then you will have just the PayPal Express Checkout in place. The Express Checkout part is what makes use of the pp_ prefixed pages. The other checkout pages are for the credit card method, Direct Pay.
There is the option of using Payments Standard but I feel this is much harder to work with to get a good checkout experience.
