The merchant account you use must support recurring payment processing (if you want to create products in your Shopping Cart that have recurring payments or installment type products). Under BILLING > SETTINGS > "Recurring Billing" tab, the "Validation" button is for Authorize.net/DirectPay/PPS merchant accounts only.
For PayPal you do not need to validate anything there; you just need to enter the required pieces of information in the fields. You can follow the instructions provided by clicking on the tutorial links there.
If you don't have a merchant account setup, you will see a red strip on the top of the screen when you go to the CART module to create a product: "Warning! You cannot sell online products just yet. Please visit Billing > Settings section to configure your payment gateway". If you don't have a merchant account that supports recurring payments, when you click on a product's recurring option, an alert will prompt you to setup a recurring payment method first.