A contactless smart card is any pocket-sized card with embedded integrated circuits that can process and store data, and communicate with a terminal via radio waves.
Contactless smart card readers use radio waves to communicate with, and both read and write data on a smart card. When used for electronic payment, they are commonly located near PIN pads, cash registers and other places of payment. When the readers are used for public transit they are commonly located on fare boxes, ticket machines, turnstiles, and station platforms as a standalone unit. When used for security, readers are usually located to the side of an entry door.
(source: http://en.wikipedia.org/wiki/Contactless_smart_card)