TouchPoint Terminal Flickr user Angermann

Smartphone makers, wireless carriers, and credit card companies have all proclaimed their love for near field communication over the last week. And we share their enthusiasm: NFC has a lot of exciting potential. Soon enough, we'll be able to make payments, unlock our houses, stop worrying about our cumbersome Wi-Fi passwords, and hop on the subway without a transit pass, all from our phones. Here's how. What Is NFC? NFC is a short-range, low-power communications protocol between two devices. One device, the initiator, uses magnetic induction to create a radio-wave field that the target can detect and access, allowing small amounts of data to be transferred wirelessly over a relatively short distance (in NFC's case, the distance must be less than 4 inches). If that sounds a lot like RFID, the tech used by, for example, wireless toll-collection devices like EZ-Pass and FasTrak, it's probably because NFC is pretty much an evolved form of RFID. The difference is that RFID is a one-way street: Your EZ-Pass transmitter beams your $4.25 toll to the tollbooth's receiver, and that's the extent of the transaction. But, crucially, NFC is two-way, allowing your NFC-enabled gadget to both send and receive information. Compared to other wireless protocols like Wi-Fi or Bluetooth, NFC is exceedingly slow, with a maximum data transfer speed of 0.424 Mbps, less than a quarter that of Bluetooth. But NFC has several key advantages over Bluetooth: It consumes a mere 15 mA of power (practically nothing for today's jumbo smartphone batteries), it has the possibility for greater security (more on that in a bit), and it forgoes the involved "pairing" process of Bluetooth entirely. Bluetooth needs to be configured; NFC is completely effort-free, requiring nothing more than a tap. What Can You Do With NFC? The three main concepts that the NFC Forum, the main association of companies promoting NFC, is pushing are "sharing, pairing, and transaction." Transaction is the most obvious of the three, and the one we'll probably start seeing first. A smartphone with an NFC chip could very easily be configured to work as a credit or debit card. Just tap your phone against an NFC-enabled payment terminal, and bam, money spent, consumerism upheld, everyone's happy. But that's really only the start of what NFC can do in terms of transaction. The other contents in your wallet aren't safe from NFC takeover, either, which is sure to enrage the formerly bulletproof wallet industry. NFC could work well for public transit passes, library cards, hotel room keycards, and office building passcards. Even government-issued IDs like driver's licenses and passports can be replaced or augmented with NFC, though the security concerns there could push such applications further into the future. But the point is, it's all possible, and relatively easy. Even keys could someday become a relic of the past, replaced by the tap of a phone to a lock. "Sharing" is a little bit trickier, due to the limitations of the tech. Mostly, it'll be used much like QR codes--(the square barcode-like tags scannable by your cellphone camera--are used now, just without the need to open an app and take a picture. An active NFC-enabled device like a smartphone can interact either with another active NFC device or with a passive tag. That tag is basically just a little chip that's embedded with some kind of data to transfer--maybe it's in a printed ad, and provides a URL for more information. Those passive tags don't require power, either, instead relying on the RF field created by your phone, so you can just tap your phone to the tag and have a little bit of data--often a URL--beamed to your phone. Debbie Arnold of the NFC Forum says "the concept of tag-reading is really exciting to me," as those passive, unpowered tags are very cheap and could be embedded in all kinds of places. Tap your phone against a tag on an appliance to get its warranty info, or on a pack of cigarettes to get some horrifying government-sponsored images of smokers' lungs. You know, for fun. With its sub-0.5-Mbps speeds, you won't be beaming high-def video with your smartphone, so sharing of files will be limited to smaller items like photos, documents, and URLs (which, in our cloud-connected environment, is often all you need). But say you do want to send a fairly large file like a video. NFC can come in handy there too--as a bridge to a more intensive wireless protocol. Which is where the "pairing" concept comes into play. Tap your phone to another phone to instantly configure a Bluetooth or Wi-Fi connection, without the need for passwords. Or tap your phone against your new router, and never again have to worry about that tiny scrap of paper with your deliberately complex Wi-Fi password that you could've sworn your roommate taped to the freezer. Or tap one phone to another to instantly exchange contact information, even when there's no available 3G connection.

Google Nexus S Google's Nexus S, made by Samsung, is the first NFC-compatible smartphone in the U.S. Google

Why Are Gadget-Makers, Bankers, Merchants, and Wireless Carriers So Gung-Ho About It? NFC has some pretty amazing possibilities, but the reason every company from Google to Visa to McDonald's to T-Mobile is singing its praises has nothing to do with your ability to remember your router's password. In their eyes, NFC is always bracketed by dollar signs, with thoughts of direct advertising and real-time customer data causing their brains' mouths to mind-water (it's a serious condition). Pay for a purchase with your NFC-enabled phone, get a coupon. Tap your phone to an NFC-enabled movie poster, get a special offer for a 1PM Tuesday showing of Gnomeo and Juliet: The Squeakquel (this will be in the near future, obviously). Use NFC's mobile payment capabilities, and you're likely to get coupons, promos, samples, or other various digital perks beamed back to you in response. But that doesn't explain why the business types are quivering in their business suits about NFC. The answer: It's all about advertising. When Google's soon-to-be-ex-CEO Eric Schmidt recently took the stage at Mobile World Congress, he was barely able to contain his excitement. Google, let us recall, is in the business of ads and customer data. When you make an NFC purchase, your phone isn't just transmitting your bank numbers for payment. It can also transmit your buying habits and demographic information. That sounds terrifying, but for the most part that kind of information is already out there and being used every time you buy an app, or anything from Amazon, or search for a product on Google. NFC just has the potential to make that data available instantly and in real time, which is exceedingly valuable to marketers and retailers and other people who care that you prefer Five Guys to Shake Shack. And instead of coupons, you might get beamed advertising instead--intensely targeted ads tailored to your latest purchase. Of course, it's unlikely that your personal data would be given to merchants without your knowledge -- at least by Google, which has a history of providing opt-out options for advertising like that. But if would certainly be possible. Why Now? At MWC, Schmidt said that "NFC has been around for a long time, but everything has just started to come together," which is mostly true. Magnetic induction for data transfer has been around for quite a few years, and mobile payments via magnetic induction have even become the de facto standard in Japan. The Mobile FeliCa (Felicity Card) has been in wide use in Japan, packaged into handsets from DoCoMo and Sony, but according to Debbie Arnold, spokesperson from the NFC Forum, systems like Mobile FeliCa "were more of a precursor to NFC." Mobile FeliCa is a one-way transfer card, a simpler form of RFID, that requires no power. "Nobody wanted to put up a product until NFC was ready," says Arnold, and it appears that it's ready now. In late 2010, the NFC Forum finalized its first wave of technical specifications, as well as announcing its certification process for devices. Debbie Arnold notes that the program "gives manufacturers a means of confirming that their devices comply with NFC Forum specifications, and helps to ensure interoperability." It was only last year that tests and pilots were undertaken, which in turn led the banks, mobile carriers, and hardware manufacturers to jump on board and start really putting the web of NFC together. What About Infrastructure? It's generally assumed that the introduction of NFC into smartphones will require a massive infrastructure overhaul, but that may not be the case. NFC, as an evolved form of RFID, is actually compatible with existing RFID terminals, which are distributed by companies like Visa and MasterCard and are present in businesses from the international (McDonald's) to the local (my childhood sandwich purveyor, Wawa). For your bog-standard wireless payment, no fancy new hardware will be necessary.

NFC's N-Mark NFC Forum