The PayPal system communicates with the bank's system and verifies the log in info. If the login info is valid, you've validated your bank account. Don't know the exact technical back end play by play but that's what I understand it to be.
Or you can just select the "I use a different bank" to use the manual method where PayPal puts 2 small deposits into your bank account and you confirm the amounts in the Wallet page for the bank account.
