Transponder keys are factory-made accessories that come with a car and provide for radio transmission between the car and the key. This radio transmission allows for a key to be programmed to only start a specific, individual car. Thus, only the person who is in possession of a car’s transponder key will be able to start and drive it. Transponder keys reduce the opportunity for car thieves to steal a car.
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A transponder key blank, which has not been programmed, can crank a car. It can take more than 30 minutes for the car key transponder to align itself with the system of the car, as the electronics within the car reset. Transponder car keys are available for many different cars, but are more common in high-end models.

The way transponder key programming works involves a microchip that resides in the top of the key. This microchip has a serial number, which a transponder key programmer has made unique to that key. The electronic/engine control units (ECU) will send a request to the vehicle for it to validate the serial number. If the car doesn’t recognize any serial number within its set of confirmed and correct numbers, the car will not start.

When buying a vehicle that includes transponder keys, it's a good idea to have at least two keys. Sometimes keys are lost, so having a second valid, programmed transponder key is important. If replacement transponder keys are needed, they can usually be made by a vehicle dealer or locksmith. It may be possible for a driver to program his or her own blank keys, but the process can vary by car.
The technology involved in programming keys to specific cars has lead many vehicle manufacturers and insurance companies to consider cars with transponder keys to be virtually theft-proof. There are many reports, however, of thieves finding ways around the transponder, sometimes simply by towing the car away. Some manufacturers have been resistant to releasing their programming codes to locksmiths, possibly for fear of theft, but most information is available to authorized users. The perception that transponder keys make a car nearly impossible to steal has caused problems for some owners, as it can be more difficult to convince an insurance company when a theft does take place.

The use of vehicle transponders was introduced as a result of the German Insurance bodies refusing to underwrite vehicles that did not have some form of passive electronic immobilisation. The passive meaning that no action had to be undertaken by the user to 'arm' the system.

A transponder system comprises two primary components being the processor/interrogator and a microchip (transponder) embedded within the head of the key. The processor usually interacts with the fuel injection and varied other vehicle electronics systems.

When an attempt to start the vehicle is made, the interrogator sends a burst of Radio Frequency (RF) energy - at a defined frequency - to an antenna which usually surrounds the face of the ignition cylinder. As the transponder contains a tuned circuit matched to the frequency of the RF burst, a small voltage is generated by induction within the transponder chip. Whether this charges a capacitor I don't know, but the result is that the induced voltage causes the transponder chip to emit, by RF, it's individual code number - a thirty two (32) digit number, which can also contain alfa numeric characters.

If the processor recognises the returned code number, it then allows the starter motor, fuel pump and/or fuel injection systems to function, and allow the vehicle to start. A common sign of a faulty or absent transponder is that the vehicle will start but will only run for a few seconds.

As suggested recently, it is the processor/interrogator module that is programmed with which key is allowed start privileges. The transponder chip is only an identification number for the key in which it is embedded. Interestingly, the amount of time it takes to start, send and stop the transmission of the code number is a factor as to whether the processor will accept the code.

The main players in transponder technology seem to be Philips, Texas Instruments and Megamos, which each have their own idiosyncrasies regarding replacement keys and such.

Some transponder keys can be duplicated using reader/encoding hardware and software and writable transponder chips. Others have to be introduced (programmed) into the processor/Interrogator to be functional.

Several key blank manufacturers, Silca in particular, are devoting a considerable amount of R&D into transponder technology to enable the locksmith industry to offer a viable service to customers who's vehicles have transponder immobilisers fitted. With the exception of BMW, Mercedes, Volvo and a few Euros' using "crypto" or rolling code transponders, the 'average locksmith' is able to provide key duplication, and generation in some cases, on a competitive basis without manufacturer or dealer involvement.

Some systems require the use of a 'learning key' to program additional keys - Honda and some Euros.

Toyota use a master (black head) and sub master key (grey head) system, similar to their mechanical valet key system. The valet/sub master will operate door and ignition locks and start the vehicle but cannot be used to introduce new key to the vehicle. The master key is used in conjunction with a series of ignition on/off cycles and opening and closing of the door to introduce new keys. - sounds strange but it's true !

Ford , in Australia at least, are very easy if you have a working key. For a lost key it is more time consuming than anything.

Mitsubishi and Isuzu require use of a "dealer only module" and their universal diagnostic tool - the hand held 'computer screen' that they plug into the vehicle for diagnostics.

If a customer presents with a broken key, it is possible to duplicate or generate a new key using a normal key blank and then hold the broken key's head close to the ignition cylinder to allow the vehicle to start. Another method is to carefully remove the transponder chip from the key head and epoxy the chip to the key. Of course using the correct OEM or transponder key blank is the ideal solution.

Having two transponder keys on the same key ring or in close proximity to the ignition cylinder when starting the vehicle can cause both keys to emit their codes at the same time, and cause the processor/interrogator to fail to accept either code. - corrupt data so to speak. As to whether having a "toll road transponder" interfere with vehicle immobiliser, it is possible..but unlikely as the "toll transponder" would probably operate at a different frequency.

Some of the immobilisers can be disabled by use of the vehicle system diagnostic tool, but I feel that this function is for diagnostics rather than disabling the immobiliser completely.