I need someone to explain this to me.

AVR RFID tag

attiny85-rfid

[pc486] sent in his hack that uses an ATtiny85 to act like an EM4102, a chip used for RFID tags. Minimally, all that is needed is the AVR and a coil, but he recommends some filtering capacitors. Depending on the size of the coil, different frequencies and ranges can be achieved. This project actually includes several hacks, such as using the coil for not only power, but a clock signal. The coil is actually able to power the chip without being connected to the power pins due to clamping diodes on the connected pins. The firmware is short but available on subversion.

Related: Scratch-built RFID tags