Bitcoins

What I know about Bitcoins:
-They're an online currency (and a new one I think)
-Not much else

What I want to know about Bitcoins:
- How exactly does it work?
-Why was it invented if there's already paypal?
-How many people use it?
-Why would you store money in a Bitcoin wallet and not in a bank?

Useful links:
http://bitcoin.org/en/you-need-to-know
http://bitcoin.org/en/how-it-works
http://en.wikipedia.org/wiki/Bitcoin
http://coinmill.com/BTC_USD.html
https://en.bitcoin.it/wiki/FAQ

Important information:
- Bitcoins is a relatively new currency, created in 2009 by someone with the pseudonym Satoshi Nakamoto.
- One bitcoin is worth about $95.45 USD, but it changes very frequently.
- The total value of all the Bitcoins that exist now is about 1 billion dollars.
- Bitcoins can be bought, via paypal (even though thats for physical bitcoins normally), by bank account, and by other physical bank/credit sources.
- Since bitcoins are relatively new, they're also being issued to people who create and own "blocks" that solve the mathematical equations needed to make a transaction. This is called Mining, and every 10 minutes about 25 bitcoins are generated.
- Bitcoins are being used more frequently because it's an easier way to do online, and in some cases international transactions because once you acquire bitcoins you can exange them to your local currency.
-Since 2011, there were a reported 60,000 bitcoin users.

How this relates to my life:
Because our world and we basically depends on money, and this might be a new way to deal with transactions and saving that may be more common in the future, and if you're connected constantly it would be less of a hassle, although I don't see the point in it if there's already paypal.

Question I still have:
I think I need to clarify how it still works as a whole. How does the currency change and who fixes the errors since Satoshi's been inactive from participating in Bitcoin since 2011?
How can you just generate money out of thin air virtually like that?