RFID or Radio Frequency IDentification is a technology where information stored on a microchip can be read remotely, without physical contact using energy in the RF spectrum.  An RFID system consists of a reader or interrogator which emits an RF signal via an antenna.  The microchip receives the energy via an attached antenna (termed an RFID tag) and varies the electromagnetic response its antenna in such a way that information can be transferred to the reader.

Frequencies

There are several different frequency ranges used in RFID including Low Frequency (LF, 125 kHz), High Frequency (HF, 13.56 MHz), Ultra High Frequency (UHF, 433 MHz, 860-960 MHz) and Microwave (2.45 GHz, 5.8 GHz).  These bands in general do not require a license if the transmitted power is limited.  Some bands can be used globally (HF) while others are specific to certain regions (UHF in US, EU and Japan).

Capacitive vs. Inductive

There are two modes of communication used in RFID (termed coupling), inductive coupling and capacitive coupling.  Inductive coupling involves the reader emitting a magnetic field.  When a tag enters the field, the chip will vary its antennas response which will result in a perturbation of the magnetic field which can be detected by the reader.  The strength of a magnetic field drops sharply with distance from the emitter, hence inductive systems are inherently short range.  This is the mode of operation at HF.

Capacitive coupling involves the reader emitting a propagating electromagnetic wave.  When this wave impinges on a tag, the chip will modify the antenna radar cross section in such a way that the reflected signal containing the information on the chip can be detected by the reader.  This is the primary mode of operation at UHF and in the microwave region.

Active vs. Passive

RFID tags are termed active or passive based on how they are powered.  Active tags are battery powered and will actually actively transmit a signal.  Active tags have the longest read range (~100 meters) and are the most expensive due to the battery and transmitter cost.

Passive tags have no on-tag power supply.  The energy to activate the chip is derived solely from incoming wave from the RFID reader.  The read range is limited by the transmitted power density necessary to achieve sufficient voltage for the chip to activate.  Passive tags are significantly less expensive than active tags and in general will have significantly less range.

A third class of tags are semi-active or battery assisted passive (BAP) tags.  These tags include a battery so the chip will always have sufficient energy to turn on but they do not have an active transmitter.  Since, in general, the limiting factor on the read range of a passive tag is getting sufficient power to the chip, BAP tags have greater range than passive tags although at a higher cost and limited life due to the battery.

Read on Metal 

At UHF frequencies, most RFID tags are a variation on a standard dipole antenna design.  The antenna is designed to provide a good "match" to the microchip.  This enables a smooth flow of energy captured by the antenna to the chip enabling it to turn on.  Unfortunately, dipole antenna performance is greatly affected by the electromagnetic properties of materials in the vicinity.  This problem becomes acute when metal is nearby.  The presence of metal will change the antenna's properties such that there is no longer a good "match" and power will not flow to the chip and the tag can not be read.