(FORTUNE Magazine) – MEG WHITMAN IS ON THE LAST LAP OF A two-day, if-it's-noon-it-must-be-Rotterdam investor road show. She's pitched eBay's global growth to six rapt audiences in three Dutch cities in eight hours. As we fly into Frankfurt, Whitman is beat, but she gamely engages in a discussion about a topic she professes to dislike: power. "I don't actually think of myself as powerful," she says. When Rajiv Dutta, a native Indian who is eBay's chief financial officer, tosses out a profundity--"To have power, you must be willing to not have any of it"--she agrees. You'd expect Whitman to be glad the talk is over when we touch ground, but as she climbs into the back seat of a black Mercedes, she doesn't let it go:

"Ask anyone about me, and they would never think of power. You know, you say, 'sky,' and they say 'blue.' Say 'power,' and no one would say 'Meg Whitman.' "

Well, we would, so here goes: Meg Whitman, 48, is the most powerful woman in American business (for more on powerful women, see the following story). Since she arrived as CEO and president almost seven years ago, eBay has grown from $5.7 million to $3.2 billion in estimated 2004 revenues. To put that into perspective, hers is the fastest-growing company in history--faster than Microsoft, Dell, or any other company during the first eight years of its existence. That $3.2 billion in revenues will probably produce more than $1 billion in operating income this year. eBay has such high margins partly because it has no factories or inventory, but also because its customers do the work. Some 48 million active users will select, price, buy, sell, and ship $32 billion worth of merchandise this year. If eBay were a retailer, rather than the world's largest online marketplace, it would be bigger than Best Buy and almost the size of Lowe's. If eBay employed the 430,000 people who earn all or most of their income selling on its site, it would be the second-largest employer on the FORTUNE 500, after Wal-Mart.

Despite all that, it's easy to underestimate Whitman's power. As she likes to say, "It's our customers who have built eBay." eBay's business model looks so simple--take an online trading platform, let sellers attract buyers, buyers attract more sellers, and so on--that people say things like, "A monkey could run this thing." Which is exactly what a hotshot MBA, new to eBay, told Whitman to her face. (She laughed; the MBA still has his job.) One of her board members, Scott Cook, the founder of Intuit, jokes that Whitman found "a parade and ran in front of it."

But the idea that anyone with a pulse could run eBay is naive. It's a lot harder than it looks. The fact is, Whitman and her team are building and tuning what many consider to be the company of tomorrow--a model 21st-century organization of minimal staff and maximal profitability. Whitman has steered the company in surprising directions and made counterintuitive strategic choices. Running eBay is an act of imagination; it is the opposite of some straightforward exercise in the caretaker arts.

Her power is unconventional too. Whitman doesn't have the kind of raw, command-and-control power of, say, Exxon Mobil's Lee Raymond--or, for that matter, of Hewlett-Packard's Carly Fiorina, the former reigning queen of FORTUNE's powerful women list. Unlike Fiorina--who is struggling with a troubled merger, earnings disappointments, and restless investors--Whitman had to amass a more complex, subtle kind of power. As one of her admirers, A.G. Lafley, CEO of Procter & Gamble, says of power, "It's not about control, and I don't think it's about size. The measure of a powerful person is that their circle of influence is greater than their circle of control."

OF COURSE, THERE ARE SOME BASIC steps you need to take before you widen your circle of influence. Like, for instance, establishing credibility by doing what you say you're going to do. That sounds like a no-brainer, but it's amazing how few CEOs actually follow the rule. Goldman Sachs analyst Anthony Noto says, "Of all the companies I've covered, only eBay has never missed its targets." Not that Whitman shies away from aggressive goals: In 2000, when revenues were $431 million, she announced that eBay would reach $3 billion in 2005. Few investors believed her, and even her own board had doubts. "I thought it was nuts," says Cook about the goal. Today, as eBay flies past the $3 billion mark a year ahead of schedule, her credibility has attracted lots of powerful fans in addition to Lafley. General Electric CEO Jeff Immelt says, "There's a direct translation between what she says and what she does, which we really admire in people."

Just as important as her credibility is her sense of when to do nothing. It's counterintuitive, but Whitman has expanded eBay by resisting the temptation to chase growth. During her first few years at the company, she recalls, "People were saying, 'Go into B2B, buy Ariba, make eBay like Amazon.' " She did the opposite, focusing on the consumer market and collectibles because they're the items that eBay's most passionate users love to sell. Bent on building an intensely loyal following, she shunned TV advertising until 2002--after other Internet startups long on marketing razzle-dazzle but short on business sense had squandered their capital on Super Bowl ads. "We used this phrase, 'Play good golf,' " says Jeff Jordan, who heads eBay's North American operations. "That means, play your own game well and don't get hung up on where the other guy's ball is."

That applies in spades to a couple of megadeals Whitman pursued--and then backed away from. In early 2000, eager to find a partner who could help expand eBay globally, she and her team visited AOL brass at their Virginia headquarters, hoping to sell eBay to AOL. "We presented to them, and they seemed distracted. People kept coming in and out of the room," she recalls. Unbeknownst to her, AOL was, that very day, negotiating to merge with Time Warner (parent of FORTUNE's publisher). Three days later, AOL announced the biggest deal in history--now notorious as one of the worst. If not for that megamerger, might Whitman have sold eBay to AOL? "Possibly," she says, "but we asked ourselves, 'Do we want to be an itsy-bitsy part of a gazillion-dollar company?' No, that's not good."

Two months later, she came even closer to selling eBay to Yahoo. But Yahoo wanted her to report to Jeff Mallett, then COO--which hardly thrilled her. "It wasn't the reporting relationship per se," she says, "but by having me report to the COO, it was clear that they were interested in us being the auction functionality on Yahoo." And no one at eBay wanted that. As an eBay director said later, "We're like the guy who leans over to pick up a gum wrapper while the bullet flies over his head."

Despite her skill at doing nothing when necessary, Whitman has also had the guts to make some bold bets. Two years ago, over the objections of some of her top executives, she bought PayPal, which operated the most popular payments system for online transactions. eBay International chief Bill Cobb, for one, believed eBay was better off investing in its own payments operation, Billpoint. But Whitman saw the PayPal opportunity more clearly than others did. After attending focus groups and talking with consumers who favored PayPal over Billpoint, she says, "I thought, okay, this is an enabler in the marketplace and a huge friction reducer for buyers and sellers." She paid $1.5 billion and replaced PayPal's management quickly. The pricetag was viewed as too high at the time but, says Terry Semel, CEO of Yahoo, eBay's fiercest Internet competitor, "PayPal has been an enormous help to eBay. It was a great acquisition."

Whitman makes big bets with people too. She stepped up aggressively in 1999, when eBay's website crashed for 22 hours. She calls this event eBay's "near-death experience"--the young company risked losing its entire trove of customer and transaction data. Also, the crash exposed a glaring weakness: eBay didn't have the in-house talent to fix the site, a very bad problem for an Internet company. Whitman blames herself. She says she didn't "go with my gut" when, early on at eBay, she suspected that the tech group had not built a site sturdy enough to handle enormous and growing transaction volumes.

What saved her, and eBay too, was a new technology chief. Whitman met Maynard Webb, then Gateway's tech boss, a few days after the outage and pleaded with him to come to eBay. "I was like a crazed woman on a mission," she says. She agreed to pay him an annual salary of $450,000--when she was earning $195,000--and 500,000 options. ("The most options I had ever given was 100,000," she recalls.) Webb is now eBay's COO. The infrastructure he built handles, in a typical day, more transactions than Nasdaq--with no major outages in almost four years.

REACHING THIS BLISSFUL STATE OF TECHNICAL STABILITY was no mean feat for someone who, prior to joining eBay, had almost no experience with technology. The youngest of three children, Whitman grew up on Long Island and went to Princeton, where she majored in economics. After Harvard Business School, she studied brand management at P&G (Ivory shampoo) and then strategy at Bain. When she moved to Disney, in strategic planning (a group notorious for strong-arming the company's business units), she stood out because "she had tremendous respect for the operating people," says Paul Pressler, then a consumer-products executive at Disney and now CEO of the Gap. Whitman left Disney to follow Griff Harsh, her neurosurgeon husband, east and worked at Stride Rite, then FTD, then Hasbro. She was hardly a superstar--maybe because she never jockeyed to be one. She also had two young sons, now 19 and 16, to care for.

It was Whitman's consumer marketing background that made her attractive to eBay. Bob Kagle, the Benchmark venture capitalist who backed eBay, says that when he was fielding CEO candidates in 1998, Whitman was the one who had a folksy approachability that he knew would appeal to the eBay community. After her interview she asked something about eBay founder Pierre Omidyar that no other contender did: "Pierre isn't going anywhere, is he?" Kagle explains, "Most CEOs would want the founder out of the way. She wanted him to stay. This was huge."

Running eBay has proved a lot more complicated than Whitman ever figured. She runs a company and an enormous, rowdy swarm of sellers who live off it. She has to do right by her shareholders, of course, but she also has to keep the swarm happy. Doing all that means Whitman has as many managerial roles as Pez has dispensers.

At eBay Live! you see Meg as celebrity--working the throngs (10,000 eBay users attended in June) and autographing T-shirts and trading cards that picture a cartoon version of her while fly-fishing--her hobby. Here, Whitman is not only eBay's living icon but, at the same time, the users' best friend. "Where are you from?... What do you sell?" she asks each customer who walks up to her, from a long line that snakes through the New Orleans convention center. Everybody calls her "Meg," and when anyone boasts about his growing business on eBay, she reflexively replies, "There you go!"--like a mom who tells her kid that she knew he could do it, and gosh darn it, he did. Taking the stage before several thousand customers, she tells them, "eBay's success will always be based on your success.... eBay reaffirms my faith in humanity. eBay is proof that people are basically good." Somehow she manages to say it without sounding fake or sappy. She means it.

All this up-with-people stuff (wedding of two eBay users, soaring gospel choir) makes Whitman come across like another powerful woman who talks about enabling her followers: Oprah. "I do use the word 'enable' a lot," Whitman says, liking the comparison. "Enable, not direct. Use carrots, not sticks." Whitman lacks Oprah's glam, of course. When I impolitely ask whether she has been wearing the same clothes for three days straight, she replies, "Two shirts, two pairs of pants." She wears the same outfit, navy polo shirt and khaki pants, as other eBay employees--it's "egalitarian." She happily invents a self-effacing tagline for herself: "She's frumpy, but she delivers."

There's also Meg as mayor, a role she plays every day in the eBay community of users. It involves fielding complaints, listening in on conference calls and online chats with customers, and juggling the conflicting demands of constituents. One hot-button issue that divides "power sellers" and hoi polloi at eBay Live! is Whitman's refusal to offer discounted fees for high-volume sales. eBay's mission has always been to provide a level playing field for buyers and sellers, and she refuses to budge. This means no catering to special interests--from the No. 1 snow-globe peddler to FORTUNE 500 companies such as Dell and Best Buy that sell excess inventory on eBay. Whitman says she has told CEOs such as Sears' Alan Lacy and Home Depot's Bob Nardelli, "I know that the normal world works with volume discounts, but it's not the way we run the marketplace." Nardelli says, "I applaud her position. I just wish I could have convinced her otherwise." Home Depot has stopped selling on eBay, but Nardelli acknowledges that Whitman is probably wise to resist giving discounts to big merchants. "Once you start, where do you stop?" he says.

As eBay's top cop, she wrestles with fraud, a big concern of existing customers as well as Internet users whom she would love to get. While eBay claims that only 0.01% of transactions are reported as fraudulent (such as fake Tiffany items, which recently prompted Tiffany to sue eBay), the estimate is probably low because a lot of fraud goes unreported. Whitman has mounted a serious fraud-prevention effort but generally remains laissez faire about policing the site. That's because Omidyar envisioned eBay as a self-regulating marketplace where users are responsible for their trades. (Also, like the tobacco companies, eBay reduces potential corporate liability with the message that customers trade at their own risk.) "We're not in the business of removing personal responsibility. eBay is not a hermetically sealed marketplace," Whitman says.

Her free-market philosophy goes only so far, though. Sometimes Whitman has had to play censor of items traded on the site. "We crossed the Rubicon in 1999," she says. That's when she decided to ban firearms, alcohol, and tobacco. She also outlawed murder memorabilia less than a century old. (You can sell Lizzie Borden's ax but not Jeffrey Dahmer's refrigerator on eBay.) Trading one's virginity is not permitted, but selling a simple lunch date is. A lunch with Warren Buffett recently went for $202,000, prompting Buffett to remark to Whitman, "It's always interesting to see what your market value is in real time."

She struggled most over her decision to ban Nazi memorabilia. Three years ago Starbucks chairman Howard Schultz, an eBay director at the time, returned from a trip to Auschwitz and passionately urged Whitman to take Nazi items off the site. The debate inside the company was intense. As some execs and board members clung to eBay's libertarian ethos, Whitman recalls, "I finally said, 'Okay, I know, but I can't stand this.' " She banned all Nazi items except documents, coins, and copies of historical books like Mein Kampf. "This decision doesn't yield to analysis," she says. "It's a judgment call. There has to be one person making the decision, and it's the CEO."

Whitman has one more important role inside eBay: Meg as den mother, nurturing her ambitious scouts with proper values. Yes, it sounds warm, fuzzy, and most un--Captain of Industry-esque, but it works to her advantage. Benchmark's Kagle likes her soft touch. "People aren't threatened by her," he says. (Her one dictatorial habit, say colleagues: instructing people where to sit at meetings. "My mother has always said that the right seating is the secret of of a good dinner party," she says.) Whitman is so unrelentingly pleasant that a cynic can't help but wonder: Is she for real? Could it all be just a shtick? When asked this question, Terry Semel laughs. "Meg is Meg. She is who you meet. She's smart, straight, and to the point. She's just really nice to do business with."

NOW THAT SHE'S GOT THE POWER THING DOWN AND HER company is running more smoothly than in the days of terrifying system crashes, Whitman is focusing on strategic issues. The biggest is, Where does eBay go from here? It just bought a 25% stake in Craigslist, an online marketplace that runs local classified and personal ads. Is eBay moving headlong into a newspaper-industry stronghold? Whitman says she hasn't decided yet. A more pressing question is what to do with PayPal. Right now, in most people's minds, it's "the way to pay on eBay," as PayPal boss Matt Bannick says, but one-third of PayPal's revenues come from non-eBay transactions. So PayPal could be developed into a way to pay offline and even be transformed into a broad-based financial services company--potentially a threat to commercial banks.

Or not. Remember, Whitman knows when to hold her fire. "Most companies abandon their core too early," she says. Her strategy, for now at least, is to treat eBay's U.S. business as a cash cow and invest aggressively to expand internationally. That makes sense, says Morgan Stanley analyst Mary Meeker, who has followed eBay longer than any other Wall Street analyst. Meeker notes that 750 million of the world's Internet users are not active eBay customers, and about 75% of all Internet users are now outside the U.S., vs. 25% a decade ago. That offers fat opportunities and, flush with cash and rising profit margins, eBay can certainly afford to pounce.

In 1999, when Whitman began expanding eBay internationally, her strategy seemed dubious. "We weren't sure it was going to work," she says. "Some people thought eBay was a uniquely American concept--that it worked only in an optimistic culture and that people really had to trust each other." But she sat, wearing a headset for translation, in focus groups with Internet users outside the U.S. and became convinced that the urge to trade is human nature. She first moved into Europe and Australia, often acquiring tiny eBay-like operations created with the intention of being sold to eBay. That's how eBay set up shop in Germany in 1999. Today Germany is the "best eBay franchise worldwide," notes Whitman. Aided by restrictive retail laws (most stores are closed on Sundays), annual trading volume per capita on eBay Germany is the highest in the world--more than $100 for every German man, woman, and child.

Asia is Whitman's new focus, and the strategy is straightforward: Get in first and fast. She learned a tough lesson in Japan four years ago when eBay launched an online trading business there five months after Yahoo. Given the business's first-mover advantage (people want to trade on the platform that has the most buyers and sellers), eBay couldn't compete, and Whitman pulled the plug in Japan two years ago. "Japan is a friendly reminder that there is no entitlement," says Kagle. "We can't afford to rest on our laurels."

Arriving late in China is not an option. Whitman has felt a passion for China since she was a teenager. In 1973 her mother, Margaret, was featured in a documentary by Shirley MacLaine about "ordinary" American women on a trip to China. It was a transforming experience for Margaret, who came back and told Meg the world was open to her. Nearly 30 years later, when Whitman was moving eBay into Germany, her mother pestered her to invest in China first. "I told her, 'Mom, Germany has 40 million Internet users. China has one million. Germany, 40. China, one.'" ("Once Meg makes up her mind, you can't change it," says Margaret Whitman, now 84.)

Whitman eventually heeded Mom's call. In the fall of 2001 she and Stephanie Telenius, then an international vice president, traveled through Asia. "We called it the Thelma and Louise tour--two blond American women do Asia," Whitman says. In Shanghai they met with a startup called EachNet. "Right after our meeting, in the taxi on the way back to our hotel, I said to Stephanie, 'You know what? We should do this.' It was really early. There was practically no e-commerce in China. But this is a long-term bet." Whitman bought EachNet for $180 million. China is now eBay's fastest-growing market, with 84 million Internet users, vs. 189 million in the U.S. In three to five years, Whitman figures, more people will be on the Net in China than in the U.S. How might eBay potentially lose in China? By not investing aggressively enough, she says. Analysts agree, noting that eBay has more more intense competition there than in any other market.

An even longer-term bet is India. Cobb's international group had put India on the back burner. Then, one day last January, Gil Penchina, an international vice president, walked into Cobb's office and said, "I think we ought to buy India." (Even supposedly humble eBay managers talk about "buying" countries.) "What?!" Cobb replied. He listened to Penchina and agreed that India, even though only 1.6% of its population uses the Net, has China-like potential. "The next day I went to Meg and told her that we should buy India. She said, 'What?!' I explained, and a half-hour later she said, 'Yeah, we ought to do this.' A month later we were in front of the board getting authorization to do it." In August, eBay completed the acquisition of Baazee.com, India's largest online trading company, for $50 million.

There's one hole in this otherwise pretty picture, and it's a surprising one. Even though Whitman is a born morale builder, she's not a natural at prepping people to carry on after she's gone. Omidyar says, "The current challenge eBay faces is building an institution that outlasts her and everyone else on the management team." Leadership development has been an ongoing concern of eBay's board, and Whitman herself admits, "My weakness is that I haven't done enough day-to-day coaching and mentoring." eBay is growing extremely fast--to an estimated 7,400 employees by year-end, vs. 5,700 at the end of 2003--and her top executives need to bone up on industrial-strength leadership skills. "None of us has managed 8,000 people in 29 countries," notes North America boss Jordan, 45, who is the frontrunner to succeed Whitman as CEO.

THE SUBJECT OF WHITMAN'S RETIREMENT comes up on day three of the European tour. As we board the plane to Berlin, Whitman is uncharacteristically on edge. The hotel in Frankfurt, where we stayed the night before, lost its Internet service, and she's "going through withdrawal." Taking her seat, she quickly plugs in her computer and calms down as she calls up the agenda for the eBay board meeting in Berlin. "We're such a grownup company, I can't even stand it," she says, practically gushing over the detailed agenda. "We even have a spouses program." She's playing here, but she really is amazed at how far she and eBay have come. When reminded that in 1999 she told FORTUNE that she planned to stay at eBay no more than five years, she replies, "I know I did. But I was coming off the heels of that site outage. That exposed a vulnerability."

How much longer will she stay? "I truly don't know," she says. Some people close to her figure two or three more years. Despite speculation, she insists she is not interested in becoming CEO of Disney when Michael Eisner retires. In fact, she doesn't want any post-eBay CEO job at any company, period. "This is probably the pinnacle," she says. "I don't know what I'll do next, but it could be philanthropy, teaching, or going to Colorado to ride horses." Horses? Well, she does have $1.2 billion in stock and a condominium in Telluride. Yes, Meg Whitman riding away at age 50 would be another distressing case of the business world losing a powerful woman in her prime. Then again, giving the power away--that's so Meg.