Consider this chance: you can use NFC tags (it's becoming popular, and you can already buy stickers from China at a very low cost), and with a reader you can not only read the tag, but create a communication session with the TAG (identification, encryption, data transfer...).
Plus, since many vendors are embedding NFC readers on their smartphones (Samsung Galaxy Nexus has been the first), you can think of creating a smartphone app to replace your reader.
For the tags, gargoyling gives TagStand, IdentiveNFC and many others, with prices below 1€/tag for small numbers, you can go much lower with big purchases.
Reliability and security are surely available, as NFC is being used for payment in many places, and it's being adopted also for ATM services.
It's actually fairly cheat if you know how to do it, this isn't something I'd recommend for someone new to electronics though. You could probably build a decent reader for under $5. Why not look at prebuilt readers and tags like the following:
Seeedstudio Reader
Seeedstudio Tags
ADDED
The following mainly covers DIY tags.
If still interested after reading this ask questions and we can talk about DIR readers.
The price of RFID tags is usually low enough that it is economic to buy them complete BUT you can "roll your own" and there may be advantages in doing so.
For a very raw DIY approach the Microchip MCRF355 IC datasheet here allows you to bild receiver coil etc. BUT these ICs are not readily obtained and the datasheet is dates 2002, so I'd consider them a learning exercise.
A 13.56 MHz RFID design guide from Microchip found here and dated 2004 shows how the above IC can be employed and gives valuable insight into general principles.
[Antenna Circuit Design for RFID Applications - Mrcrochip AN710](Antenna Circuit Design for RFID Applications) provides extensive antenna design and performance information. Highly valuable.
As an indication of how small RFID tags can 'bee'.
Related to a paper by Dr. Whitehorn and colleagues which I have not yet located.
A moss carder bumblebee, Bombus muscorum.
NXP Forum Mifare RFID / NFC system - more complex than you want but useful.
Demo board related to above $88
TI "Tag It" transpoonder inlays $US0.35/5000.
This the sort of thing that you compete against when considering making your own tags. See below.
Texas Instruments Tag-it™ HF-I standard transponder inlays consist of 13.56-MHz high-frequency (HF)
transponders that are compliant with the ISO/IEC 15693 and ISO/IEC 18000-3 global open standards.
These
products offer a user-accessible memory of 256 bits, organized in eight blocks,
and an optimized command set,
available in five different antenna shapes, with frequency offset for integration into paper, PVC, or other
substrates.
The Tag-it HF-I standard transponder inlays are manufactured with TI’s patented laser tuning process to provide
consistent read performance. Prior to delivery, the transponders undergo complete functional and parametric
testing, in order to provide the high quality that customers have come to expect from TI.
The Tag-it HF-I standard transponder inlays are well suited for a variety of applications including, but not limited
to, product authentication, library, supply-chain management, asset management, and ticketing/stored value
applications.
Tag insert Related
Tag insert - Related
Added:
Here is an immensely informative application note from a company with a number of potentially relevant products.
ib technology quad reader tag is usful for its nicely minimal circuit diagram plus wealth of application information.
But wait, there's more (from the same people).
home page
Range of reader modules
Reference design kits ..... one example
Evaluation kit
Datasheets and application notes looks very useful
Best Answer
Your Arduino's microcontroller has a UART (Universal Asyncronious Receiver/Transmitter) which can be programmed to be connected to a pair of pins on the board. This uses the same signals as your RFID reader, except at different voltage levels (and inversion). To connect the two, you need a converter, as described in the link you provided.
If you were to directly connect the RFID reader to your Arduino, you would probably damage the Arduino due to the voltage differences.
If you don't want to breadboard the circuit, you could use something like http://www.cutedigi.com/arduino-shields/rs232-shield-for-arduino.html