Many of the worries surrounding RFID use, however, are either unsubstantiated or can be mitigated, according to "Playing Tag: An RFID Primer," a recent study conducted by the Pacific Research Institute (PRl), a free market organization in San Francisco.

Mandating RFID Implementation

Part of the controversy, the study contends, is due to the negative publicity surrounding the technology's major proponents -- retail giant Wal-Mart (NYSE: WMT) and the U.S. Department of Defense. Both organizations have mandated RFID implementation by their suppliers, primarily to track and restock inventory.

Privacy groups are concerned that retailers might use RFID to profile shoppers by linking their purchases to other identification numbers such as credit cards or driver's licenses. A recent report by a European Parliament task force warns that RFID can register consumers' movements, spending, productivity, habits and preferences.

According to PRl's study, companies can just as easily collect this data from payment cards, loyalty cards, and bar codes. However, well-known security expert Bruce Schneier, author of Beyond Fear, points out that there is a major difference between data collection and RFID technology: "RFID chips allow the surreptitious access and collection of data. Anybody can use the information."

Hacking E-Passports

Perhaps the most controversial use of RFID is the U.S. State Department's rollout of "e-passports" -- documents containing RFID chips that allow passports to be cross-referenced with security databases. The U.S. Department of Homeland Security is seeking to establish worldwide RFID requirements for all passports.

Critics of e-passports argue that the information on an RFID chip can be read remotely by anyone with a receiver, including pickpockets or terrorists. However, the study maintains that additional safeguards have been added to e-passports, including a cover that shields the RFID chip from being read unless it is less than four inches from the scanner. Schneier disputes this, maintaining that e-passports are currently readable at 30 feet and are highly "hackable."

In the United States, governments at both the local and national levels are responding to these concerns by moving to regulate, if not ban, certain uses of RFID. Legislators are passing laws prohibiting the use of RFID chips in driver's licenses, the remote collection of data from RFID tags without the person's consent, and the implanting of RFID technology in government identification documents.