From WHMCS Documentation
For PayPal invoices to be automatically marked paid when you receive a payment you need to enable IPN in your PayPal account. This is done from your PayPal account by going to My Account > Profile -> Instant Payment Notification Preferences (under Selling Preferences). You need to enable IPN and leave the callback URL blank. The callback URL is pre-populated with "http://", which must be deleted.
[edit] PayPal Subscriptions
Unless disabled in the PayPal gateway config, when a user views an invoice for a recurring product or service they will be shown a PayPal Subscribe button. This allows the user to subscribe so that their payment for that product or service is sent to you automatically each month and automatically applied to the invoices.
However, the subscribe button will only show on or before the due date of the invoice. This is to prevent the user signing up for a subscription late as then the invoice would be paid late every month.
