For most purposes, you only need to do one quick payment test, so it's not worth taking the time to setup PayPal test accounts. You can test a small payment with a live account and a real credit card, and then refund the transaction in PayPal.
If you do want to perform more extensive testing, PayPal has a "Sandbox" environment that you can use for testing. The Sandbox is a completely separate environment. It has its own accounts that work exactly like live accounts, but no real money is involved. A Sandbox merchant account can only receive payments from a Sandbox buyer account or a special test credit card number. A live merchant account can only receive payments from a live buyer account or a real credit card. There is no communication at all between the Sandbox and the live environments.
You would need to setup two sandbox accounts, a merchant account and a customer account. The account in Payage must be set to Account Type "Sandbox" and have the correct Client ID and Secret Key. You can find more information about the PayPal Sandbox here:
https://developer.paypal.com/webapps/developer/docs/classic/lifecycle/ug_sandbox/