Getting started with PayPal Sandbox
Published:
Update 2016-01-13: Apparently PayPal has changed their sandbox developer account setup UI and such since I wrote this post together with the PDT and IPN blog posts.
Luckily it's much easier now, and you should be able to get all the information you need from their own PayPal Sandbox Testing Guide. I've also decided to delete the old contents of this post to prevent anyone from trying to follow the now incorrect steps. 🙂