Radio frequency identification, or RFID, is a generic term for technologies that use radio waves to automatically identify people or objects. There are several methods of identification, but the most common is to store a serial number that identifies a person or object, and perhaps other information, on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder or an RFID tag). The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to computers that can make use of it.
RFID is not necessarily "better" than bar codes. The two are different technologies and have different applications, which sometimes overlap. The big difference between the two is bar codes are line-of-sight technology. That is, a scanner has to "see" the bar code to read it, which means people usually have to orient the bar code toward a scanner for it to be read. Radio frequency identification, by contrast, doesn't require line of sight. RFID tags can be read as long as they are within range of a reader. Bar codes have other shortcomings as well. If a label is ripped or soiled or has fallen off, there is no way to scan the item, and standard bar codes identify only the manufacturer and product, not the unique item.
An RFID system consists of a tag made up of a microchip with an antenna, and a reader with an antenna. The reader sends out electromagnetic waves. The tag antenna is tuned to receive these waves. A passive RFID tag draws power from the field created by the reader and uses it to power the microchip's circuits. The chip then modulates the waves that the tag sends back to the reader, which converts the new waves into digital data.
Microchips in RFID tags can be read-write, read-only or “write once, read many” (WORM). With read-write chips, you can add information to the tag or write over existing information when the tag is within range of a reader. Read-write tags usually have a serial number that can't be written over. Additional blocks of data can be used to store additional information about the items the tag is attached to (these can usually be locked to prevent overwriting of data). Read-only microchips have information stored on them during the manufacturing process. The information on such chips can never be changed. WORM tags can have a serial number written to them once, and that information cannot be overwritten later.
Active RFID tags have a transmitter and their own power source (typically a battery). The power source is used to run the microchip's circuitry and to broadcast a signal to a reader (the way a cell phone transmits signals to a base station). Passive tags have no battery. Instead, they draw power from the reader, which sends out electromagnetic waves that induce a current in the tag's antenna. Active and semi-passive tags are useful for tracking high-value goods that need to be scanned over long ranges, such as railway cars on a track, but they cost more than passive tags, which means they can't be used on low-cost items.
RFID transponders range in size from the size of a grain of rice to the size of a brick. The size depends on whether the tag uses a battery to broadcast a signal or simply reflects a signal back from the reader. The other factor is the size of the antenna. As the antenna gets smaller the read range decreases. Tags that are the size of a grain of rice have an antenna etched onto the microchip and hence the reduced reading range.