The RFID technology process starts with a radio frequency identification (RFID) tag.  The Tag is made up of a microchip and antenna, and is typically packaged in a paper label.

The Tag is "read" by a reader with an antenna.  The reader sends out radio-frequency waves that form a magnetic field when they join with the antenna on the RFID tag. 

There are two basic types of Tags:  Passive and Active.  A passive RFID tag creates power from the radio frequency magnetic field sent from the reader and uses it to energize the circuits of the RFID chip.  The chip in the radio frequency identification tag sends information back to the reader in the form of radio-frequency waves. 

The RFID reader converts the new waves into digital information which is then turned into object information through integration with reference data.  Active RFID tags use a battery to run the circuits of the chip, and communicate with the Reader by drawing power from the RFID Tag battery.

Typical Active Tags (have a battery) cost US $4 - $10.  Passive Tags are going for US $0.7 - $0.12 per tag depending on purchase volumes.

There is a wide range of Readers in the market today, running anywhere from (US) $500 to $5,000 depending on the complexity and range of processing.

What's REALY IMPORTANT TO REMEMBER is that most tag-reader combinations are proprietary to the company making them and don't work with other company products.  Choose you tag vendor carefully.