The Tension Betweentechnology and privacy isn't new, of course. One hundred and fourteen years ago, Samuel D. Warren and Louis D. Brandeis argued in the Harvard Law Review that "numerous mechanical devices threaten to make good the prediction that 'what is whispered in the closet shall be proclaimed from the house-tops.'" Among the instances they cited was a "somewhat notorious case" involving an actress who'd been photographed surreptitiously while she performed in tights.

The Warren-Brandeis article, "The Right to Privacy," acknowledged that who we are largely consists of what is known about us, and it urged that our personal information therefore deserves some measure of privacy protection. Warren and Brandeis were especially concerned about an out-of-control press; were they alive today, they would undoubtedly be equally worried about out-of-control databases. From what we do, to where we go, to what we look like, to whom we socialize with, to what drugs we take and what magazines we read, each scrap of data may be insignificant-but taken together, they reveal a great deal.

Some of the most personal new information about you comes from loyal-shopper cards. While these programs purport to save you money, the store gets much more in return: when merchandise bar codes are scanned at the checkout, the purchase data gets correlated with the personal information connected to your loyalty card.

Katherine Albrecht, a Nashua, N.H.-based former marketing executive who now heads Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), notes stores retain that sales data for years, looking for patterns in your purchases and making inferences about you, and they sell it to companies like Acxiom and ChoicePoint as well. "Cash registers are no longer adding machines with cash drawers," she says. "They're high-speed, data-collecting computers with connections to the Internet. And shopper loyalty cards tie that data to your identity. The whole goal is to figure out everything you can learn about your customer. We're creating a retail zoo, where customers are the exhibits."

For that reason, CASPIAN and other privacy groups have taken a hard line on the deployment of RFIDs in stores, libraries, and currency. Technologically speaking, an RFID tag is pretty simple: it's a small microchip coupled to a tiny radio antenna. The tags come in various shapes and sizes, but the smallest,Hitachi Ltd.'s u-chip, is a speck about the size of a grain of salt, just 0.4 millimeter on a side. The cheapest tags now cost about 5 cents apiece, and some manufacturers predict they can bring that down to about 1 cent within five years.

The typical RFID tag can store no more than 128 bits, much of that memory taken up by the Electronic Product Code, a numeric designation that identifies the manufacturer, product, and serial number. Each tag is unique—that's right, eventually, every pair of Dockers khaki pants, every can of Colgate Shave Cream, every box of Trojan Ultra Ribbed condoms will have its very own ID number. With bar codes, by contrast, all boxes of Ultra Ribbed condoms share a single product code.

Most RFID tags don't have a power source. Instead, when the tag comes within range of an RFID reader's electromagnetic field, it wakes up and uses the reflected energy to communicate with the reader. RFID readers, unlike their bar-code counterparts, can scan multiple tags simultaneously and at a distance-from a few centimeters to 10 or more meters.

In a pioneering foray into RFID technology, Wal-Mart Inc., headquartered in Bentonville, Ark., announced last year that it would make its top 100 suppliers use RFID tags on all pallets and cartons of goods. Stores in the Dallas-Fort Worth area started using the technology to track warehouse inventory this past spring. The retailing giant figures RFIDs can save it over $8 billion a year, out of total sales of $244 billion, mainly by reducing labor costs, theft, and errors.

When a shipment arrives at a Wal-Mart store, readers installed at the warehouse loading docks automatically scan each pallet and case of goods, transmitting the RFID data to an inventory control computer, which matches the serial number with, say, the type and number of cans of shaving cream on the pallet.

During the initial phases, Wal-Mart is using its own internal computer network to keep track of serial numbers. Eventually, though, it will probably switch over to a global Web-based network shared by other RFID-savvy retailers, suppliers, and manufacturers. In that scheme, the inventory computer would identify the serial number by sending a query over the Internet to something called an Object Name Service. These databases, operated by VeriSign Inc., Mountain View, Calif., the same company that keeps track of Internet domain names, act like a reverse telephone directory: upon receiving a serial number, they produce an address, namely the Internet Protocol (IP) address of a server where detailed information about the tagged item is located.

Privacy experts generally don't object to using RFID tags to streamline warehouse operations. And Wal-Mart has said it plans to use RFIDs only in its warehouses, although certain items, like TV sets and computer printers, will still have their tags when they hit the retail floor. But most industry observers are convinced that the tags will eventually replace bar codes on individual goods-retailers like Wal-Mart won't be able to wring out every last efficiency until they do. And once the tags are on individual items, stores will inevitably link you to what you buy, creating databases of everything you've purchased from them. The information will be simply too valuable to toss out: software will scan the databases, looking for patterns in your purchases; make inferences about you and other shoppers; and possibly send other merchants or service providers your way.