An RFID system may consist of several components: tags, tag readers, tag programming stations, circulation readers, sorting equipment, and tag inventory wands. Security can be handled in two ways. Security gates can query the ILS to determine its security status or the tag may contain a security bit which would be turned on and off by circulation or self-check reader stations.

The purpose of an RFID system is to enable data to be transmitted by a portable device, called a tag, which is read by an RFID reader and processed according to the needs of a particular application. The data transmitted by the tag may provide identification or location information, or specifics about the product tagged, such as price, color, date of purchase, etc. The use of RFID in tracking and access applications first appeared during the 1980s. RFID quickly gained attention because of its ability to track moving objects. As the technology is refined, more pervasive - and invasive - uses for RFID tags are in the works.

In a typical RFID system, individual objects are equipped with a small, inexpensive tag which contains a transponder with a digital memory chip that is given a unique electronic product code. The interrogator, an antenna packaged with a transceiver and decoder, emits a signal activating the RFID tag so it can read and write data to it. When an RFID tag passes through the electromagnetic zone, it detects the reader's activation signal. The reader decodes the data encoded in the tag's integrated circuit (silicon chip) and the data is passed to the host computer for processing.

Security gates can then detect whether or not the item has been properly checked out of the library. When users return items, the security bit is re-set and the item record in the ILS is automatically updated. In some RFID solutions a return receipt can be generated. At this point, materials can be roughly sorted into bins by the return equipment. Inventory wands provide a finer detail of sorting. This tool can be used to put books into shelf-ready order.