You have to enable auto return in your PayPal account, otherwise it will ignore the return field.
From the documentation (updated to reflect new layout):
Auto Return is turned off by default. To turn on Auto Return:
1 - Log in to your PayPal account at https://www.paypal.com. The My Account Overview page appears.
2 - Click the Profile subtab. The Profile Summary page appears.
3 - Click the My Selling Tools link in the left column.
4 - Under the Selling Online section, click the Update link in the row for Website Preferences. The Website Payment Preferences page appears
5 - Under Auto Return for Website Payments, click the On radio button to enable Auto Return.
6 - In the Return URL field, enter the URL to which you want your payers redirected after they complete their payments. NOTE: PayPal checks the Return URL that you enter. If the URL is not properly formatted or cannot be validated, PayPal will not activate Auto Return.
7 - Scroll to the bottom of the page, and click the Save button.
IPN is for instant payment notification. It will give you more reliable/useful information than what you'll get from auto-return.
Documentation for IPN is here: https://www.x.com/sites/default/files/ipnguide.pdf
Online Documentation for IPN: https://developer.paypal.com/docs/classic/ipn/gs_IPN/
The general procedure is that you pass a notify_url parameter with the request, and set up a page which handles and validates IPN notifications, and PayPal will send requests to that page to notify you when payments/refunds/etc. go through. That IPN handler page would then be the correct place to update the database to mark orders as having been paid.