I mostly agree with Tommr here. The point of clarification I would make is expected volume - and volume over time. I use paypal for online payments of all kinds because I only pay when I use it. I can go months without a single transaction, and then I can have 10 in a month. I pay more (than I would if I had a regular merchant account) on that 10 transaction month, but I pay nothing on the zero months. So it comes down to how many sales (regardless of number of products) you expect to have over the next year (and possibly beyond). Take some time and do the math.
Keep in mind, too, that it's not just a merchant account that you need - you also need a payment gateway to process the online sale through that merchant account. They are two different things and each bear their own cost. This is why Paypal is popular with smaller sites and contractors (and ebay sellers, etc) - because it serves as both the merchant account and payment gateway all in one. You also need your own site to be under a secure certificate, too - whereas with Paypal, no info is entered until you are on their secure site.
For the various reasons Tommr pointed out (feeling of security, not needing to hand off visibly to another site, and all of those things) a full blown payment gateway/merchant account is the way to go, but you don't want that go end up costing you more than about 20-25%. And that number needs to come down a bit if your product requires some customer support and that sort of thing. (Basically, that 20-25% is the cost you would expect to process a transaction in a normal business - from all your merchant account stuff to paying the cashier/sales person). If you can safely say that the costs of delivering the product from site to end of checkout is under 25% total, then it's probably worth the merchant account. More volume means that this percentage comes down, and conversion rates will definitely improve if you can do it.
If that is all too much and you go for the choice of Square or Paypal - I'd pick PayPal if only because of familiarity. 50% of the people who posted so far never heard of square. Everyone who has ever bought something on the web has certainly at least heard of Paypal. (Paypal Pro Tip Make sure your email address associated with Paypal is to a real domain and not a gmail or yahoo or other similar address. It lends to YOUR legitimacy when the customer sees that and will help conversions).