Embedded in the tag is a microchip for storing the data.
The rest of the tag is an antenna that transmits data to the reader.
The reader unit consists of an antenna and radio transmitter with a decoding capability attached to a stationary or handheld device.
The reader emits radio waves in ranges anywhere from 1 inch to 100 feet, depending on its power output, the radio frequency employed, and surrounding environmental conditions.
When an RFID tag comes within the range of the reader, the tag is activated and starts sending data.
The reader captures these data, decodes them, and sends them back over a wired or wireless network to a host computer for further processing.