RFID stands for Radio Frequency Identification – a technology which is increasing fast especially within the retail market. A survey by GS1 UK has found that over 25 percent of the UK's top retailers, including Marks and Spencer, Tesco, and Asda, are already using RFID tags in their stores, while another 20 percent are trialing them.
RFID is an ID – identification system, it depends on a small chip that is implanted in a tag. The implanted chip can both store and record data, including a serial number, price or record of the purchase. There are many different items the tag can be attached to including stock items, shipping containers, and vehicles. An electronic scanner can then use radio signals to identify, read and track the specific ID tag.
Tags are attached to stock items that need to be tracked. The tiny tag-chip (sometimes called an IC Integrated Circuit) is connected to an antenna. The tag chip has a memory which stores the stock items EPC (Electronic Product Code) and other relevant information and this can be tracked by RFID readers anywhere.
The RFID reader (also known as an interrogator) is a network controlled device either fixed or mobile with an antenna that forwards power in addition to data and specific commands to the tag-chips.
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There are a lot more detail, technical knowledge and in-depth technology that goes into making RFID work but the above should help with your basic understanding of RFID.