One of the benefits of shopping with a credit card is the ability to dispute the charge later if the product isn't delivered, isn't as advertised, etc.  The merchant bears the primary risk of such an event, called a chargeback.  

However, if the merchant is not able to pay back the customer, or provide them a new product the merchant account provider is liable for the amount. If the merchant account provider is not able to pay back the customer then their sponsor bank is liable for the amount (to see how these parties relate to each other see "Merchant Account Supply Chain").  The sponsor banks are very careful with their underwriting, i.e. they are selective about who they let become merchant account providers, so that almost never happens.  In fact, most merchant account providers subcontract from larger merchant account providers who also bear chargeback risk (see "Different Kinds of ISOs").

To avoid being liable for any customer chargebacks the merchant account provider will sometimes impose a reserve on the account, which basically means that they force you to give them some money to cover any chargebacks.  Reserve requirements vary greatly between processors and depend significantly on their opinion of you as a merchant (see "Surprise Reserve").  

Overall, there are not that many chargebacks. In 2005 Global Payments, one of the largest Merchant Account Providers, only had 0.3% of their revenue, which is only about 0.35% of processessing volume, charged back.  In other words, only .00105% of transactions are charged back.  In my opinion, the merchant account provders make a much bigger deal out of chargebacks than they need to given the small impact they have on their profits.