I've never done it before (I usually limit my purchases to $150 or less) but I did find some information by going to the Help tab on the top of eBay's home page and typing "escrow" into the search window.
It turns out that eBay has its preferred escrow company (what a surprise!) and you can request that the seller handle the transaction thru it. The company (escrow.com) covers purchases from $500 on up. You pay them, they notify the seller that the funds are in hand, the seller ships the item, you notify escrow.com when it is received in good shape and escrow.com releases the funds to the seller. There is a fee involved and it can be paid by the buyer, the seller or split between the two.
There are other escrow companies on the net, but apparently eBay doesn't want you to use them. You can actually cancel a transaction if a seller states in their auction that they will take escrow funds but refuses to use escrow.com or one of eBay's approved international escrow companies. You should contact the seller regarding escrow issues before you bid on or purchase the item.
