What is RFID ?
RFID stands for Radio-Frequency IDentification. The acronym refers to small electronic devices that consist of a small chip and an antenna. The chip typically is capable of carrying 2,000 bytes of data or less.

The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a credit card or ATM card; it provides a unique identifier for that object. And, just as a bar code or magnetic strip must be scanned to get the information, the RFID device must be scanned to retrieve the identifying information.
A significant advantage of RFID devices over the others mentioned above is that the RFID device does not need to be positioned precisely relative to the scanner. We're all familiar with the difficulty that store checkout clerks sometimes have in making sure that a barcode can be read. And obviously, credit cards and ATM cards must be swiped through a special reader.
In contrast, RFID devices will work within a few feet (up to 20 feet for high-frequency devices) of the scanner. For example, you could just put all of your groceries or purchases in a bag, and set the bag on the scanner. It would be able to query all of the RFID devices and total your purchase immediately.

How does RFID work? 
A Radio-Frequency IDentification system has three parts:
A scanning antenna
A transceiver with a decoder to interpret the data
A transponder - the RFID tag - that has been programmed with information.
The scanning antenna puts out radio-frequency signals in a relatively short range. The RF radiation does two things:
It provides a means of communicating with the transponder (the RFID tag) AND
It provides the RFID tag with the energy to communicate (in the case of passive RFID tags).
This is an absolutely key part of the technology; RFID tags do not need to contain batteries, and can therefore remain usable for very long periods of time (maybe decades).
The scanning antennas can be permanently affixed to a surface; handheld antennas are also available. They can take whatever shape you need; for example, you could build them into a door frame to accept data from persons or objects passing through.

When an RFID tag passes through the field of the scanning antenna, it detects the activation signal from the antenna. That "wakes up" the RFID chip, and it transmits the information on its microchip to be picked up by the scanning antenna.