This article from Ars-Technica is a great high-level primer on Near Field Communications (NFC). NFC is a very exciting technology that has actually been around in one form or another for years. Many folks consider it an evolution of the contactless payment systems already out there from MasterCard and Visa. In Asia it’s been around for a while with FeliCA. There are well known standards, like ISO/IEC 14443, supporting the wireless communication, especially around payments. The standards leverages two types of data communication, type a - Miller encoding and type b Manchester encoding.
Keep in mind, likening it to the contactless payment can suggest that’s the only usage. However, there’s lots more potential applications. Think of it this way, hold your phone around 4CM(up to 20cm, but most will be 4cm) from whatever it is you are interested and get more information. Looking at a car, hold it near the side view mirror and get cool videos, looking at a tent (yeah I like camping), hold it near a tent pole and get stats on the tent, etc. I think you get the point. However, these are only one way communication examples.
While NFC stands on the shoulders of Radio Frequency Identification (RFID), it is different in a couple of ways. One difference is two-way peer to peer communication. So, the NFC device(i.e. phone, camera, laptop, etc.) can communicate back and forth with the tag. Traditional RFID is one way. Lots of new applications are enabled through two way communication. Envision applications like an NFC-equipped digital camera that could transfer an image to an NFC-equipped TV set for viewing. Or an NFC-equipped computer could transfer mobile apps to an NFC-equipped mobile handset. Or shoping at a Pharmacy, hold up the phone to a tag and get a coupon, and on and on. It’s always nice to see technologies like RFID start to catch up with the long-term vision.
Given the communication requires close proximity, that inherently helps security. In addition to the proximity requirement, encryption is available as well. That isn’t built into any of the standards, but is feasible and likely important in personal and financial applications.