I have had a few paypal transactions, each done a different way. The main options seem to be Purchase goods, and personal Gift or personal Payment owed. Is there a difference on the receiving end? What is the best way to go? Does it even matter?

It makes a difference if it goes through customs. If it is a purchase, the reciever is charged a brokerage fee on goods over $50. I always mark as gift for international shipping. Not sure if payment owed gets taxed at customs.

My understanding is that with a 'purchase', PayPal charges a fee for the transaction.  With "gift" there is no fee, however you also don't have any buyer protection.  So if you send someone payment as a "gift" and they end up scamming you (e.g. not sending the merchandise you ordered) you have no way to file a complaint to get your money back.

Quoted from MadTitan

It makes a difference if it goes through customs. If it is a purchase, the reciever is charged a brokerage fee on goods over $50. I always mark as gift for international shipping. Not sure if payment owed gets taxed at customs.

For the Customs form on the shipping label, that's correct.  That isn't linked to the PayPal transaction though - Customs doesn't know how you paid for the merchandise.  You could send PayPal payment of $200 as a "purchase of goods" (or a cheque, money order, gold coins, etc.) and the seller could still mark your package as a "gift" worth $4 on the box if they wanted.