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When I used Amazon SES, I had to put TXT records in my DNS so that Yahoo/Gmail knows that the server is allowed to send from my domain name.

However, when I signed up for Heroku and Sendgrid Add-on (Free edition), I was not required to enter any TXT fields. Why?

How does Gmail know that Sendgrid is "authorized" to send on behalf of my domain name if I do not enter records in DNS?

As of right now, I could send From: hello@paypal.com using Sendgrid??

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SendGrid's Free accounts do not require any DNS changes because they set the return path header, SPF, and DomainKeys headers to point to SendGrid's SPF and DomainKeys. The mails "you" send appear to be coming from SendGrid for the purposes of SPF and DomainKeys and of course SendGrid has that stuff already set up.

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