The PPAPI toolchain build uses the native compiler (on Windows, this is cl.exe). This produces a shared object/DLL that will be loaded by Chrome. Unlike Native Client, it is not sandboxed.
Like NaCl, it links against the ppapi library, so you can using Pepper (PPAPI) functions. Unlike NaCl and PNaCl, there are no limitations on other APIs you can use. You can use the Windows API, for example. This makes it easier to get your application working while you are porting it to Native Client.
That being said: you cannot release a PPAPI plugin in the Chrome Web Store.
The PPAPI toolchain is primarily used to make it easier to develop a NaCl application. This video describes the process. It is a bit old so some things have changed, but the basic steps are the same.