Shipping on online services

Hello guys, I want to sell something online but im wondering what to do about shipping. Do I set shipping to free? Doesn't Ebay put holds on money sent through paypal until a product is received?

Yes, PayPal holds money until the seller of the transaction (not just eBay) has built up a reputation with eBay/PayPal. Even many very active users still have their money held at random.

Offering Free Shipping is essentially what eBay WANTS, you just have to figure out if offering free shipping is feasible to yourself.