The show PayPal checkout option in the cart settings allows you to give your customers the option to checkout using PayPal standard in addition to the gateway option that you configured above under gateway settings. If you have configured PayPal standard under the gateway settings above you should NOT check the show PayPal checkout option checkbox. If you have configured PayPal Websites Payments Pro or PayPal Payflow Pro under the gateway settings above you should ONLY check this box if you want to give your customer the additional option at checkout to pay using PayPal standard.
For more information about the show PayPal checkout option and screen shots see page 27 of the cart manual:
http://www.smith-consulting.com/Portals/0/docs/smithshoppingcartmanual.pdf