Passive RFID is intended for:
 Manual tracking
 Semi-automated tracking, i.e. only when the location and orientation of tags and readers can be fully controlled
 Short ranges (in practice not more than 3 metres)

Active RFID is intended for:
 Fully automated tracking, i.e. when the location and orientation of tags cannot be controlled
 When the tag is required to do useful work outside of the reader's range, such as storing of sensor readings and actuation of events
 Long ranges (typically 1 to 500 metres)

The selection of passive and/or active RFID requires understanding the target application and the expectations of the users of the application.

Passive RFID is forward link limited because the tag needs to be energised by the incoming beam from the reader before it can send a reply. The ability to collect energy from the incoming beam depends on factors such as signal strength, antenna gain and polarisation. These in turn depend on the orientation of the tag and the distance between reader and tag. (An analogy can be made between passive RFID and Radar.)

Therefore, passive RFID only works well when orientation and distance between tag and reader can be controlled, such as:

 When tags are fixed to pre-arranged items on a conveyor belt and readers are fixed in such a way that the tags can always be read at an optimal angle,

 In a door access or payment card situation when the user can adjust the tag to fit the orientation and distance of the reader, or

 When the user can manually adjust a handheld reader for optimal reading angle and distance.

Active RFID has a full transceiver in both reader and tag. This makes active RFID far less orientation and range sensitive compared to passive RFID. (An analogy can be made between active RFID and traditional radio communication such as between walkie-talkies.)

The active RFID tag is powered by a battery. Messaging between reader and tag follows an extremely low power protocol to conserve the tag's battery as long as possible. This is one key reason why active RFID often makes use of optimised proprietary protocols rather than available protocols originally developed for different purposes; such as Bluetooth™, WiFi and ZigBee™ (other reasons being security, cost of tag, size of tag).

To conserve battery power, the active tag's transceiver spends most of the time asleep. It will wake up in intervals, controlled by a timer, or by a certain sensor event, such as the tag being moved. The presence of a battery allows the active RFID tag to perform useful activites also when not within reader range, such as storing sensor readings (sensor logging).

Advantages with passive RFID:
 Low cost per tag
 Almost immediate response, since it's based on sending response as soon as it has been energised by the reader
 Sufficiently thin to be used in stickers and cards
 Widespread standards, such as ISO14443, ISO15693 and ISO18000-6c (EPC Gen2)

Disadvantages with passive RFID:
 Orientation sensitive, i.e. tag gives good range in one direction, but almost no range in other directions
 Not suitable for long range requirements; in practice maximum range is 3 metres when system works within regulatory radiation limits
 Strong radio radiation, since readers need to energise tags over a distance, which can cause interference, ignition and health issues
 Tag is only awake when energised by reader, hence not possible to perform tasks outside of reader range
 Response is very sensitive to environment and can be easily blocked by interfering or obstructing objects
 Limited data rate, due to limited energy available, hence large tag memory is unpractical

Advantages with active RFID:
 Almost insensitive to orientation
 Can perform tasks when outside of reader field
 Long range (typically up to 500 metres)
 Higher data rate possible, hence larger memory feasible
 Far more resilient to interference than passive RFID
 Less dependent on environment than passive RFID
 Very weak radio radiation, typically less than 0.01 W, hence little interference, health or safety concerns

Disadvantages with active RFID:
 Higher cost per tag
 Somewhat larger form factor
 Tag will only send response to reader at each update interval, unless triggered otherwise to do so

The aforesaid are the general differences between active and passive RFID. Under each category there are also a number of different technologies and industry standards which have different performance in different situations.