Passive RFID tags do not have their own power supply: the minute electrical current induced in the antenna by the incoming radio-frequency scan provides enough power for the tag to send a response. Due to power and cost concerns, the response of a passive RFID tag is necessarily brief, typically just an ID number (GUID). Lack of its own power supply makes the device quite small: commercially available products exist that can be embedded under the skin. As of 2004, the smallest such devices commercially available measured 0.4 mm × 0.4 mm, and thinner than a sheet of paper; such devices are practically invisible. Passive tags have practical read ranges that vary from about 10 mm up to about 5 metres.

Active RFID tags, on the other hand, must have a power source, and may have longer ranges and larger memories than passive tags, as well as the ability to store additional information sent by the transceiver. At present, the smallest active tags are about the size of a coin. Many active tags have practical ranges of tens of metres, and a battery life of up to several years.

As passive tags are much cheaper to manufacture and do not depend on a battery, the vast majority of RFID tags in existence are of the passive variety. As of 2004 tags cost from US$0.40. The aim is to produce tags for less than US$0.05 to make widespread RFID tagging commercially viable. However, chip manufacturers supply of integrated circuits is not sufficient and demand is too low for prices to come down soon. Analysts from independent research companies like Gartner and Forrester Research agree that a price level of less than $0.10 is only achievable in 6-8 years.

There are four different kinds of tags commonly in use. They are categorized by their radio frequency: Low frequency tags (between 125 to 134 kilohertz), High frequency tags (13.56 megahertz), UHF tags (868 to 956 megahertz), and Microwave tags (2.45 gigahertz). UHF tags cannot be used globally as there aren't any global regulations for its usage.

See also for some Transponder devices which deliver a similar function, and contactless chipcards.