We’ve posted before about security keys—those little digital keyfobs that generate expiring security codes over and over and make it incredibly hard for someone to gain unauthorized access to your account. They’re a great idea, and now if you own an iPhone you can install a Verisign app that will work with Paypal and eBay, as well as about two dozen lesser known sites. It’s probably the easiest step you can take to vastly improve security on those accounts.

It can be a little confusing to connect the Verisign app on your iPhone to your Paypal account, so we’ve taken screen shots of the process. Here’s what you have to do.

To launch the app info page in iTunes, click here. Sorry, it won’t work on iPod Touch devices yet.

Update: To address reader questions below, what this does is add a second password to your account. Unlike your real password, however, this one is automatically generated every 30 seconds. Because you register the serial number of the keyfob with the site (e.g. Paypal), it also generates the same password every 30 seconds. Now when you log in with your normal password, you’ll be taken to a second screen where you have to enter the valid temporary password to finish logging in.

Because it’s changing every 30 seconds, it’s virtually useless to steal the password—you’d have to steal the keyfob or the iPhone. And since most online theft doesn’t take place physically near you, it’s unlikely that a criminal will be able to grab your real password and your keyfob or iPhone.

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