PayPal payment reversal; scammer at work?

Is this someone testing out credit card numbers they've stolen?

Yep. You're being used as a canary to test stolen credit cards. They found your website at random and see you're willing to accept payments. They send you a token payment of $1 to see if the card works. (They used to use iTunes to do this, where they'd buy a $1 song.)

When they see the card works, they buy as many disposable Visa gift cards as they can. This racks up a few hundred to a few thousand dollars on the card. (They used to buy goods directly but it's easier for merchants to stop shipment of a flatscreen TV than it is a stack of gift cards.)

The cardholder or the FI notices the charges and starts reversing everything, but the money has already been laundered in the form of gift cards.

Thus, the scammer successfully manages to convert stolen credit into a fistful of untraceable, disposable gift cards. These can either be used for personal gain or re-sold for a slightly lesser amount to yield actual cash.