Glenn,
Caymen is correct. If you file a complaint with PayPal, the seller will have to show proof that the items was shipped and delivered. This is usually done by the seller providing PayPal with a tracking number from any delivery service, even the Post Office (with Delivery Confirmation). Online tracking is prefered and will show when the package was shipped and where it was shipped to.
If the seller has no proof that the item was shipped or delivered, PayPal will take back your money from the sellers bank account or credit card account.
If the seller's tracking number indicates that the package was delivered by you did not receive it, then it's the delivery services problem to show they delivered it to the correct address. Usually when there is this type of problem, they delivered it to the wrong address and the seller will have to file a claim with the delivery service. If the seller did not have insurance on the package, it's their problem, but PayPal does not go beyond verifying that the item was shipped and delivered as stated by the delivery company. If you did not receive the package, the seller must file a claim with the delivery service, and that's where things can get real sticky.
Most honest businesses will have no problem requesting a trace by the delivery service. And usually it was just a mix up by the delivery service. I have had UPS fail to leave a package to me because it required a signature, but they failed to leave me a note that they attempted a delivery, and no notice that I could pick up the package at UPS.
...Rich