I assume you're using the Paypal enrollment plugin - have you read:
http://docs.moodle.org/26/en/Paypal_enrolment
I thought you just wanted to test self enrollment (non-paid). If you want to test live with Paypal, your Moodle will need to be on a domain that Paypal can connect back to to send the IPN notice of payment to Moodle in order to enroll the user in the course. You could do this using a local XAMPP install if you put your computer on the web by doing port forwarding to your computer from your ISP router for port 80. I'm not sure that Paypal IPN will use an ip address as opposed to a domain, I've never tried that, but you could try doing it using your assigned ISP address (http://whatismyip.com) to test.
I'd suggest setting up a paypal sandbox account for testing it out.
https://go.developer.ebay.com/developers/sandbox-testing-environments
https://moodle.org/mod/forum/discuss.php?d=171745#p977221
It should work fine - it's been used a lot by others.