Typically, a reader communicates with a tag, that holds digital information in a microchip; however, there are chipless forms of RFID tags that use material to reflect back a portion of the radio waves beamed at them.
The tags have storage capacity for at least an identification number.
The tag picks up signals from and sends signals to a reader. The tag contains a unique serial number, but may have other information; such as, a customers' account number.
Tags come in many forms, such smart labels that can have a barcode printed on it, or the tag can simply be mounted inside a carton or embedded in plastic. RFID tags can be active, passive or semi-passive.