Got RFID?

So close, yet so far in investor understanding, radio frequency identification -- or RFID -- is just weeks away from invading our lexicon. That's because come January, the Department of Defense and Wal-Mart (NYSE: WMT  ) will be demanding that their contractors and biggest suppliers, respectively, tag their shipments with RFID chips.

What is RFID is almost as important as clarifying what it is not. It is a great technology that is going to improve corporate operations. But contrary to what you may have heard, it isn't going to make the bar code obsolete. Not yet anyway.

Over the weekend, I spoke with Kevin Ashton, co-founder of the Auto-ID Center at MIT and now vice president of marketing at RFID specialist ThingMagic. Ashton is a pioneer in this exciting field, which is going to send ripples through most industries. His company teamed up with Intel (Nasdaq: INTC  ) last year to create a next generation tag reader, and companies like Tyco (NYSE: TYC  ) -- through its Sensormatic subsidiary -- are selling RFID readers based on ThingMagic's designs.

The full transcript of Ashton's illuminating interview will be made available to Rule Breakers subscribers later this week. In it, he provides a frank assessment of the public companies that he favors in this promising sector, such as Zebra Technologies (Nasdaq: ZBRA  ) , Hewlett-Packard (NYSE: HPQ  ) , and UNOVA's (NYSE: UNA  ) Intermec, as well as those that he sees having an uphill climb, like pet and human RFID tag specialist Applied Digital (Nasdaq: ADSX  ) .

In a nutshell, RFID will make supply chain management more efficient by enhancing inventory control. While there are also some lucrative security and point-of-sale aspects to the technology, those applications will have to wait until the passive RFID tags become cheap enough to stick on something as basic as a pack of chewing gum.

Yet having radio frequency readers communicate with otherwise dormant merchandise offers some compelling possibilities that would even make the Jetsons envious. Yes, that's still far away from becoming a reality, but it's not as far as you may think.

On Thursday, I'll be back with a closer look at the many publicly traded companies looking to play major parts in your RFID future. And if you want to check out Ashton's interview later this week, but you're not a Rule Breakers subscriber, don't worry, there is still time to sign up for a free trial.

Excited about the possibilities of being able to track things through radio frequency technology? Still not sure what RFID is all about and why you should care? All this and more -- in the RFID discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz isn't sure he would want an RFID chip implanted in him, but he wouldn't mind never losing another sock again if his garments could be tagged. He does not own shares in any of the companies mentioned in this story. He is a member of the Rule Breakers analytical team, seeking out tomorrow's great growth stocks today.