This scam is often aimed at sellers who participate in a lot if auctions on ebay, and the scam is mainly used with low value or uninsured items (this is because most high priced items are insured for safety).
Basically this scam is very similar to The "Buy and Switch" Scam which can be found on a previous page.

The following shows how the scammer carries out this scam:

• First the scammer finds an item up for sale that he/she is interested in. The scammer then bids on the item until he/she has won the auction.
  
• Once the auction is over the scammer sends payment to the seller and the seller sends the scammer the item.
  
• The scammer receives his/her item, waits a few weeks, and then emails the seller falsely claiming the item has not arrived.

• The seller does everything he/she can to locate the package, but this proves to be unsuccessful (they have no chance of locating the item because it is in the scammer's possession).

Since the item is probably not worth a lot of money (items over $50 are usually insured and delivery can be confirmed) the seller often chooses to refund the scammer's money rather then risk negative feedback.

When all is said and done, the seller is without his/her item or money, and the scammer gets away with a free item.