The update will allow you to use the app to search for local merchants that accept the new PayPal Here service, allowing you to pay the merchant from your PayPal account. The update also takes care of the usual bug fixes, and improves the UI. The latter will make it easier to find Add/Withdraw. And PayPal users with a Security Key on their account, will be able to enjoy improved messaging services.
The PayPal app works with Windows Phone 7.5 (remember that build of the OS?), Windows Phone 8 and Windows Phone 8.1, and takes the app to version 126.96.36.199. The entire app is 5MB, and is free.