We mailed a letter with your Location Confirmation code to the following address. When you receive the letter, please follow the instructions on how to enter the code on the PayPal website. Please allow days for your letter to arrive in the mail.
I guess they want to confirm that you are residing in your mailing address as part of their verification process. Probably too many people signing up for US accounts but are from some other countries.
Just make sure you only go to the paypal.com website. If the letter says anything other than paypal.com, it's probably fake. Assuming that it is legitimate, they are most likely just verifying your address. Probably just a simple fraud prevention check, and you account was unlucky enough, or triggered some flag for them to need to verify your address.
If you do not reside in that address, you probably may find some trouble and that may the reason why Paypal is doing the checks on your account. Are you located in the US ?
Well, then that can be trouble. Like I say, that is probably why they are verifying you this way because your address raised a red flag or something. I am pretty sure that you know this day would be coming when you signed up for a US Paypal account when you are not from the US. They are very strict about such things. If you used a VCC to verify your paypal account then you may have placed the last nail to your paypal coffin. Just consider your account as lost and take it as a lesson.
Thats only for US/UK PayPal members. Other countries members have to fax the address proof themselves, not PayPal asks them