Radio-frequency identification (RFID) is often thought of as a "disposable" wireless technology, since it is associated with the low-cost passive tags used for inventory management. But RFID is a vital short-range wireless technology and it is finding increasing use in consumer, industrial, medical, and military applications.

RFID technology has long been considered a wireless version of a barcode scanner. Both techniques are a form of electronic identification technology that allow secure and reliable management of products and inventory, and the cost of RFID technology, especially in the antennas and integrated circuits (ICs) used in passive tags, is dropping rapidly to make it a more feasible alternative to bar-code scanners for inventory control.

In its simplest form, an RFID system consists of a reader or interrogator, a tag or transponder, and a controller or computer. The tag has a discrete code that can be read by the interrogator. The interrogator may incorporate an embedded computer or can be connected to an external computer. When a tag enters within the read range of an interrogator, the interrogator signals the tag to transmit its data. The data can be in many forms, but typically includes a product's serial number, time stamp, product configuration, and other information about the tagged object. Once the interrogator has received the tag's information, it transfers it to the controller. In more complex setups, an RFID system may consist of many interrogators networked to one or more controller computers.

An RFID interrogator consists of an RF transceiver, an antenna, and some form of embedded computer and controller that is capable of communicating with an external computer by wired or wireless means. An RFID tag is essentially an IC and an antenna in some form of low-cost package. RFID tags can be passive, with no transmit power source of its own, or active, with its own power source, typically a small battery within the tag. Having the battery on board generally gives an active tag a greater communications range with the interrogator than a passive tag. In addition, the embedded power source enables the use of a more powerhungry RFID IC, with more memory for data storage. On the other hand, a passive tag can be made for very low cost, although its communications range and memory capability will be limited compared to an active tag. Passive tags are powered by the interrogator, by means of either nearfield magnetic induction or far-field electromagnetic (EM) wave capture, typically drawing 1 mW or less power from an interrogator to energize the tag's IC. In the near-field approach, a reader produces an alternating magnetic field by passing an alternating current through a coil in the reader; when the tag, with a smaller coil, passes through the alternating magnetic field, the field induces an alternating voltage in the tag's coil, which can be rectified and coupled to a capacitor to energize the tag's IC. In the far-field approach, the tag's antenna receives EM energy transmitted by the interrogator's antenna, which can be rectified by a diode and stored in a capacitor to then energize the tag's RFID chip. Some passive tags may incorporate on-board batteries to power a sensor, but are considered passive if the power for communication with the interrogator comes from the interrogator, rather than the tag.

The data in an RFID tag may be stored in read-only memory or in read/write memory. In the first case, data is stored once and read by the interrogator. In the second case, readwrite or "smart" tags, allow operators to update the data.

RFID systems work at various frequencies, including 30 kHz, 125 kHz, 134.2 kHz, 3 MHz, 13.56 MHz, and 30 MHz, and from 300 MHz to about 3 GHz. Passive tags usually operate at the lower frequencies while active tags operate at 300 MHz through the microwave frequencies. Examples of applications include animal identification at 125 kHz, RFID in hospitals at 30 MHz, RFID on toll roads at 433 MHz, and item tracking at 915 MHz. The read ranges for passive tags tend to be limited to a few feet at low frequencies, because of the long wavelengths and lack of available gain from small antennas at those frequencies. The read range is greater for higher frequencies, although this is also a function of the interrogator's transmit power and receiver sensitivity. For RFID systems with multiple tags, anti-collision algorithms are used to maintain a form of communications hierarchy, using spatial, frequency, or temporal differentiation to identify each tag correctly when an interrogator receives responses from multiple tags. When security is an issue, an RFID system will also incorporate some form of authentication procedure and possibly some form of data encryption/decryption.

RFID systems with active tags are categorized as first generation, with one tag per reader, second generation, for locating people and things as part of a real-time locating system (RTLS), and third-generation, as part of a wireless sensor network (WSN). The US Department of Defense (DoD) has made investments in third-generation RFID systems for asset management.

Most market studies on RFID point to adoption of the technology in a variety of markets worldwide. Market research firm IDTechEx, for example, recently completed a survey of the global RFID industry published in its report, "RFID Forecasts, Players, and Opportunities: 2011-2021." The study places the size of the global RFID market at $5.03 billion in 2009, with expected growth to $5.63 billion for 2010. The market includes tags, readers and software/services for RFID cards, labels, and all other RFID form factors. The study also points out that a total of 2.31 billion RFID tags will be sold in 2010, compared to 1.98 billion sold in 2009. Most of this growth is due to the increased use of passive ultrahigh-frequency (UHF) tags, with the largest application category for asset tracking, including for apparel tagging. The study indicates that at least 800 million passive UHF tags will be sold in 2010, compared to 550 million passive UHF RFID tags sold in 2009. The study also notes that 43 percent of all RFID tags will be sold in North America in 2010, but this will change, as China becomes a major consumer of the technology.