If you’ve seen or used the E-ZPass automated tollbooth system employed in the Northeast, you’ve already caught a glimpse of an ingenious technology called radio frequency identification, or RFID. If you have an E-ZPass tag mounted on your windshield, you don’t have to fumble around for change and wait for a slow human to take it and put it in a cash register. Instead, the toll is wirelessly deducted from an account into which you’ve already placed money. You get no interest on those funds, but you may get to glide through tollbooths—assuming, of course, that traffic officials have figured out how to assign E-ZPass lanes so that cars and trucks flow faster through them than through normal tollbooths.

The system relies on a small device that transmits information about the driver’s E-ZPass account to a receiver in the tollbooth, which relays the signal to a networked database. E-ZPass is merely the first wave of an RFID transformation of life as we know it. Before long almost everything you come in contact with, from a best-selling novel to a jar of paprika, will come embedded with a tiny chip capable of identifying itself to any receivers that happen to pass by. Think of it as a talking bar code.

The trouble with talking bar codes is that they don’t keep secrets. Some critics and consumer privacy groups see these chips as a disturbing new tool for corporate and government snoops—or thieves—who will be able to track us more precisely through the objects we buy and cart around. The ramifications for RFID have been somewhat contradictory recently, with breakthroughs followed by setbacks. Wal-Mart announced last June that it was asking its top 100 suppliers to include RFID tags on their products by 2005. A month later the company canceled an in-store test with Gillette of an RFID inventory system. Some speculate that Wal-Mart yielded to pressure from consumer groups who complained that tagged items could be used for surveillance of customers.

This moment in the development of RFID chip technology follows a pattern shared by most revolutionary consumer technologies. Evangelists unload fluffy tales of bliss, and naysayers make Orwellian proclamations about the loss of privacy or some long-revered tradition. What usually happens is that the technology is introduced anyway, and the results prove to be far less stark than the naysayers predicted as well as more interesting than the predictions of cheerleaders. In the late 1990s we heard tales that online shopping was going to create a digital paper trail for our transactions that hackers would be able to access, while simultaneously destroying beloved mom-and-pop stores across the country. Fast-forward five years and consumers have happily embraced online shopping, and mom-and-pop stores have flourished thanks to auction sites like eBay or the used-book service of Amazon. Something comparable is likely to happen with RFID: Embedding billions of tiny chips in an entire universe of commercial objects might well end up empowering consumers more than snoops and marketers. It may change the very nature of consumerism.

Radio frequency identification is a marvel of both miniaturization and mass production: a microchip and antenna small and cheap enough to justify planting on a bag of charcoal. The RFID tags used in the E-ZPass system employ a tiny coil to transmit a signal to a receiver. But the latest smart labels use carbon ink as an antenna, which means they can be crumpled or torn and still transmit. If you’ve ever looked inside a laptop, you know that power supplies take up far more room than anything else. RFIDs work without bulky batteries or AC transformers. They are powered by electric fields or magnetic energy emitted by the receivers they broadcast to.

Given the size and relative simplicity of an RFID tag, the message it can transmit isn’t complex, usually an extended version of a serial number. A new Hitachi RFID chip transmits a 128-bit number, much more information than a bar code contains but less than is found in a typical digital photo. Unlike a bar code, which identifies a generic item, an RFID label is designed to specify that, say, the item is not just a green Banana Republic sweater but also one of three green sweaters sold in the Warwick, Rhode Island, outlet.

Most of that information exists outside the RFID chip. For example, the E-ZPass system consults a networked database to determine if a driver has sufficient funds in his account to cross the George Washington Bridge and enter Manhattan. In this sense, an RFID tag is a miniature one-trick pony, endlessly sending out the same message to any receiver willing to power it up: “I am product number 5555-39993-2222-888888-24321.” The receiver then takes that number and consults the database to figure out what it’s dealing with. In the most familiar scenarios, that database lookup revolves around identifying the object’s price so that the consumer can be charged for it and identifying its make and model so that the store can replace the item on the shelf.

In one wishful vision of the future, supermarket customers zoom through checkout lanes with full shopping carts, every item instantly charged to their credit cards as a restocking notification is simultaneously sent to the store’s inventory department. The result is friction-free: no lines and no empty shelves. But RFID also opens the door for intriguing changes that involve the application of special filters to the networked database.

Imagine this simple scenario: You download a new pork recipe from the Web and get an instant report on whether you have the required ingredients available in your home. The software simply compares the database of objects nearby with the list of ingredients in the recipe. Here’s a more elaborate version: You consult an online cookbook and ask for a list of all the pork dishes that could be made using the ingredients you have on hand. Or suppose you have a cholesterol problem. Instead of memorizing an endless litany of don’ts or carting around a guidebook every time you go shopping, you simply download a cholesterol filter from your doctor’s office. The next time you visit the supermarket, your handheld RFID reader steers you to foods that will keep your levels in check.

Although privacy activists make RFID sound like yet another invisible chain wrapped around the hapless consumer by the forces of big business, the technology may well grant consumers power in the marketplace. Companies will have a much harder time selling poorly made products if shoppers come equipped with RFID readers that can instantly tap into online review sites like epinions.com. Greenpeace could release RFID filters that flag products made in environmentally friendly ways. Anyone who has ever tried to apply political values to consumer decisions knows that it takes a great deal of effort and research to keep on top of the latest developments. (Did Nike fix that sweatshop problem? Or was that Adidas?) With RFID filters, you could simply download the latest recommendations from your favorite organization and let your reader make the politically correct choices.

Right now, companies exploit a simple fact of life: Most consumers are too busy to make informed decisions about their purchases. RFID-based filtering could make that form of exploitation more difficult. Viewing the future of RFID from this angle, the challenge is to assure public access to databases. The powers that be already have a vast collection of tools available for spying on you—from your credit card purchases to your ATM withdrawals to onboard GPS systems to satellites that can read a license plate from Earth orbit. If they want to keep tabs on your activities, they can do it already, whether there’s a smart label on your sweater or not. (For peace of mind, perhaps RFID tags should include a “kill switch” that turns them off when you leave the store.) But if RFID numbers become a protected part of their manufacturer’s copyright, most of the important consumer benefits will disappear because creating a filter for a brand of milk or a line of sneakers might require a license fee.

 “The fact that a given item is number 123 in the RFID database needs to be legally considered a public fact,” says sci-fi author Cory Doctorow, who also works for the Electronic Frontier Foundation. “If you limit the public’s ability to make a connection between a product and an RFID tag, then all of these filtering technologies become much harder to pull off.” It’s hard to have a consumer revolution if you can’t identify the product you’re boycotting.

If Wal-Mart’s history is a lesson, we’re going to confront these issues sooner rather than later. After all, back in 1984 Wal-Mart embraced another little-known but promising new inventory-management tool. You may have heard of it. It’s called the bar code.