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If you’re the type to be a bit bothered by the privacy-breaching potential of shopper loyalty cards, then RFID tags should make you pretty twitchy. Short for Radio Frequency IDentification, these transponders come in sizes as small as a grain of sand, can be manufactured for dirt cheap, and hold the potential to expose uncomfortable levels of information about you to whomever is interested in finding out.

From the Boston.com article:

Why is this so scary? Because so many of us pay for our purchases with credit or debit cards, which contain our names, addresses, and other sensitive information. Now imagine a store with RFID chips embedded in every product. At checkout time, the digital code in each item is associated with our credit card data. From now on, that particular pair of shoes or carton of cigarettes is associated with you. Even if you throw them away, the RFID chips will survive. Indeed, Albrecht and McIntyre learned that the phone company BellSouth Corp. had applied for a patent on a system for scanning RFID tags in trash, and using the data to study the shopping patterns of individual consumers.

Boston.com article
Wikipedia entry on RFID tags