The figure depicts the two chief elements of an RFID system: the reader and the transponder. The word "transponder" is an artificial word made up of "transmitter" and "respond".

In the reader a generator produces a ready signal that is fed to a coil. This coil generates an alternating magnetic field, indicated in Figure 1 by the oval field lines which enter and exit the entire coil on all sides. Some of these field lines flow through the antenna coil of the transponder.

According to the law of induction a voltage is generated in the transponder coil which is then processed by the connected electronics (chip). A response signal is generated that is transmitted back to the reader, thus identifying the transponder and making it ready. This simplified description of how the mechanism works forms the basis of all variants of the RFID system. RFID systems are mostly used in inventory tracking but access systems based on RFID are also quite common. In the field of occupational safety, transponder technology is not yet that widespread as this is a new area of application.