Introduction

Q: How will you filter the payment method in onepage checkout based on some conditions?
A: There are different ways to do so. Some of them are:
#1 By overriding template: app/design/frontend/[interface]/[theme]/template/checkout/onepage/payment/methods.phtml
#2 By overriding method: Mage_Checkout_Block_Onepage_Payment_Methods::_canUseMethod()
#3 By overriding method: Mage_Payment_Model_Method_Abstract::isAvailable()
#4 By overriding method: Mage_Checkout_Block_Onepage_Payment_Methods::getMethods()
#5 By observing event: payment_method_is_active
#6 etc.

Among above methods obviously using event-observer technique is the best way to go (#5).
And here I will be discussing about how to enable the PayPal (Website Standard) method only when current currency is USD.

Steps

Suppose a skeleton module(MagePsycho_Paymentfilter) has already been created.
1> Register the event: ‘payment_method_is_active’ in config.xml.
Add the following xml code in app/code/local/MagePsycho/Paymentfilter/etc/config.xml:

...
<frontend>
	...
	<events>
		<payment_method_is_active>
			<observers>
				<paymentfilter_payment_method_is_active>
					<type>singleton</type>
					<class>paymentfilter/observer</class>
					<method>paymentMethodIsActive</method>
				</paymentfilter_payment_method_is_active>
			</observers>
		</payment_method_is_active>
	</events>
	...
</frontend>
...

2> Implement the observer model
Create observer file: app/code/local/MagePsycho/Paymentfilter/Model/Observer.php and paste the following code:

<?php
/**
 * @category   MagePsycho
 * @package    MagePsycho_Paymentfilter
 * @author     magepsycho@gmail.com
 * @website    http://www.magepsycho.com
 * @license    http://opensource.org/licenses/osl-3.0.php  Open Software License (OSL 3.0)
 	*/
class MagePsycho_Paymentfilter_Model_Observer {

	public function paymentMethodIsActive(Varien_Event_Observer $observer) {
		$event			 = $observer->getEvent();
		$method			 = $event->getMethodInstance();
		$result			 = $event->getResult();
		$currencyCode	 = Mage::app()->getStore()->getCurrentCurrencyCode();

		if( $currencyCode == 'USD'){
			if($method->getCode() == 'paypal_standard' ){
				$result->isAvailable = true;
			}else{
				$result->isAvailable = false;
			}
		}
	}

}

3> Go ahead for testing.

Happy E-Commerce!