What is a transponder key (a.k.a. chipkey?)

A transponder is a benign electronic device implanted in the head of a key which remains dormant until awakened by energy derived from its close proximity to an induction coil at the threshold of a vehicle’s ignition lock. When a transponder becomes energized by the ignition lock being turned ON, it transmits a unique Alpha-numeric identity code back to the induction coil and the on-board computer - for comparison with values stored in the computer’s memory. If the RF transmission from the transponder is an exact match then the engine can be started.