Microsoft has introduced the option to buy its made-up Xbox currency using your PayPal account, assuming you're American.
All you have to do, boy howdy, is go to the account summary page on Xbox.com, and you should find an option to associate your PayPal and Live accounts lurking in the "Manage Payment Options" area.
However, Xbox Live's Major Nelson notes that this only works for buying Microsoft Points, and only via Xbox.com, not through the console itself.
Plus, it only works if you live in the USA. We've asked Microsoft whether it's going to happen over and will let you know if we hear back.