"Mobile payments" is about as unsexy as technology buzzwords get. We're basically talking about phones and money. And it's hard enough to get people excited about money in the first place—unless you're receiving large sums of it, that is—let alone using a phone to make or spend it.

But it is exciting! Trust us. And there's a reason why you're going to be hearing a lot more about mobile commerce before this year is done.

The philosophy behind mobile payments is simple; it's the idea that everyone should have the ability to buy anything, anywhere. And it sounds a lot better—not to mention sexier—when explained that way. Because, beyond all the oddly shaped geometrical dongles and near-field communication magic, that's essentially what the likes of Square, PayPal, Google et al want to do.

Who's involved?

Today, there are essentially two main camps in the mobile commerce space—those who want to use phones as a tool to make money, and those who want to use phones as a means to spend money.

Square and PayPal fall into the former camp. Both companies want to empower small-to-medium size merchants—think artists, food trucks or mom-and-pop shops—to accept plastic payment, instead of just plain old cash.

In the latter camp, you'll find Google Wallet, which is quite literally an attempt to replace your traditional wallet with an NFC-capable Android phone. Instead of paying for goods and services with a traditional credit card, you can use your phone instead. Competitors from pretty much every retail and mobile-oriented industry you can imagine—including Target, Walmart, Verizon, and AT&T—are said to be joining the fray as well.

What it means for merchants

PayPal, grand purveyor of all things monetary and commerce-related in the online world, made an announcement last week—a small, triangular-shaped announcement. PayPal is jumping into the bourgeoning industry of mobile commerce with a service called Here, in the hopes of capturing a new swath of offline users, one swipe at a time.

Here's how it works. A merchant—perhaps a barista, or a painter—plugs PayPal’s triangle hardware into their iPhone, effectively turning it into a portable credit card reader. The hardware's job is to process the financial information hidden within a card's magnetic stripe. You swipe your card, and the phone handles the sale.

PayPal's primary competitor in this space is a company called Square, the progeny of Twitter co-founder Jack Dorsey. Square has been in the mobile commerce business since 2010, and after announcing $4 billion in transactions to its one million merchants earlier this month, it's obvious that PayPal wants a slice of that pie.

Both companies are interested in turning everyday consumer phones—and even tablets—into cheap, accessible sales machines. Put another way, think about vendors and merchants that might traditionally accept only cash—food trucks or art shows or places that usually don't have the infrastructure to set up the sort of elaborate point-of-sale system you might find in your typical retail or department store. It's an underserved, untapped market.

But if these vendors aren't already accepting debit and credit cards, how do Square and PayPal expect to convince them? It's a matter of convenience and cost. The immediate benefit is pretty obvious: merchants can use hardware they probably own already—in this case, an iPhone, iPad, or Android phone. Even better, the dongles from PayPal and Square are free.

And if this alone isn't incentive enough, it's also worth noting that credit card transaction fees—which usually vary, depending on the type of card or the bank it's tied to—are instead flat-rate. Square takes 2.75 percent on every transaction, while PayPal takes a slightly lower 2.7 percent cut. ("That .05 percent difference is small," writes Mike Isaac at Wired, "but over $4 billion in transactions, it adds up to $2 million extra in merchants' pockets.")

The goal is to allow these people to operate outside the physical boundaries of what you might traditionally consider to be a store, so they can make a sale nearly anywhere—and with nothing more than their phone.

What it means for you

What mobile payments mean for the average user is pretty clear—an easier way to pay for more things in more places without carrying cash. If this all sounds idyllic and optimistic, it really does work. During a trip to San Francisco last summer, I went to the Renegade Craft Fair, and bought far more prints and posters than was probably financially sound. Typically, I would have had to run to the ATM for cash (which sucks as a foreign Canadian traveller), but most of the vendors I encountered were using Square. It was similar to every other retail transaction I've ever made, except it was happening on an iPhone, in a giant warehouse, where traditional point-of-sale readers feared to tread.

In the case of both Square and PayPal's Here service, consumers won't really have to approach their spending habits any differently. To the end-user, each company's hardware works as you'd expect from your typical retail card-reader, on-screen signature and all. There are added niceties—the ability to be remembered by Square and PayPal via online accounts, for example, and e-mailed receipts—but the transaction process remains fundamentally familiar.

Where things get dicey is with systems like Google Wallet, which don't necessarily rely on traditional payment methods—like credit cards—but effectively replace them. For example, in Google Wallet's case, you'll need to have an NFC-equipped Android phone to take part. And there's also the matter of finding stores with Wallet support, which, at the moment, is difficult. Assuming retailers and mobile carriers launch their own unique competitors, this part of the mobile payments industry is about to get real crowded very quickly.

The point here is that mobile payments are a big deal, and with the staggering number of smartphones in use worldwide, that's a market no one wants to easily cede. And when you consider the real-world applications—without fixating on oddly shaped dongles and underlying tech—you'll begin to see why the fight to make money mobile is, quite literally, worth billions. In a world of Squares and Googles, PayPal is only the latest entrant.