That's a bummer. What will happen? Does that mean that the merchant can take the money and disappear? If so, does PayPal reimburse my credit card or does the credit card company take the hit? Or do I?
No, that does not. When the merchant captures payment, then you can dispute it at PayPal as item not received or significantly not as described if received. If you happen to lose PayPal dispute, you can dispute through the credit card. If transaction remains as an temporary authorization, it can expire in no longer than 30 days if funds are not captured or claimed by the merchant. If merchant responds and cancels, the authorization may still remain until expires.