A. This isn't a scam, it's a legitimate requirement for people that sell and collect money through paypal or any other merchant services provider.
B. As Scissor Queen stated, several times, Your Taxpayer ID, as far as the federal government is concerned, is your SSN.
C. If you are doing business, you should get an EIN, which you can then give to Paypal instead of your SSN. They need one or the other to provide you and the IRS with information. If you have an EIN, they can report using that and the IRS will figure out that it goes with your SSN.
D. There are other types of Taxpayer ID numbers, specifically those provided by your state as a function of your paying sales taxes for the purchases made from you. This TID also serves to provide wholesalers with the reporting mechanism required to not charge you sales taxes on purchases that will be re-sold by you. These TID's are not required by Paypal. Most wholesalers will require that you provide them with a copy of your business license, which shows your EIN and your state TID.
E. The bottom line is that if you have a account with Paypal, you'll need to give them either a SSN or an EIN to continue to receive payments through Paypal. If you choose to use an EIN, they may require you to upgrade to a business account. They may require you to have one on file even though you may not achieve the transaction/dollar amount threshold that requires them to provide you and the IRS with 1099 information.