Smart cards are plastic cards with embedded integrated circuits that can be used for secure identification and financial transactions. They store data in their microchips and communicate with card readers using established protocols. The main types are contact cards that must be inserted directly into readers, contactless cards that communicate via radio frequency, and dual-interface cards that support both contact and contactless. Smart cards rely on operating systems and encryption to securely store and manage access to user data for applications such as ID cards, payments, and access control.