PayPal Credit and Pay After Delivery are two different things. Both are in effect a line of credit, but PayPal Credit is I believe akin to a credit card (often with a promotional 0% interest period) whereas Pay After Delivery is entirely interest free.
Pay After Delivery has been available in the UK for quite a long time, however it is not offered to every buyer and even then not on every transaction although I'm not certain what the criteria are. The process in the UK is that you make your purchase, paying via PayPal and choosing which bank account will be subsequently billed. It's worth noting that PAD never utilises your PayPal balance, even if you have sufficient funds at the time of billing. You also need a 'back up' funding source against the bank account. 14 days after the transaction, PayPal bill your bank account. In the mean time, the seller was paid immediately by PayPal and your item has hopefully arrived.
Like Tulagirl, I typically 'pay early' once I've received whatever I've bought. However I always enter the transactions (one to the seller from PayPal, and then the transfer between my bank account and PayPal) into my budget so I'm not caught out.
PAD is particularly useful if you're ordering multiple sizes of clothing from a retailer to return some - I do this a lot with swimwear for example, placing a £200ish order then returning £150ish of it for a refund before PayPal charge my bank account, meaning I don't 'spend' more than the £50 - or if you know you have money coming in in a week or so but want to order whatever it is now so it arrives on time (or because you're impatient). I bought my sister's birthday present using PAD because there was a sale on and I didn't want to miss out on the offer, but I didn't want to actually take the cash from my bank account for another week when I knew I was about to get paid. For me personally, PAD is not exclusively available on eBay purchases but sometimes it's not there when I'd rather it was, either.
I haven't heard anything about the service being stopped in the UK. I suspect from PayPal's point of view, it encourages people to use PayPal over other payment methods if they have that bit of leeway.