When the merchant first begin using PayPal Payflow account, it is in either Test or Live mode, depending on what was selected during registration, or how the account was set up.
When the merchant logs on to PayPal Manager, he/she will be notified which mode the account is in.
Test means that all transaction information is sent to test servers at PayPal. No money trades hands in test transactions. Once the merchant complete testing the account, he/she can activate the account on the Manager Home page. Active accounts perform Live transactions.
Live means that all transactions that the merchant submits are sent to the financial institutions for processing and that real money is transferred.