WHAT IS NFC (Near Field Communication)?

NFC, short for Near Field Communication, is a short range wireless RFID (Radio-Frequency Identification) technology that makes use of interacting electromagnetic radio fields instead of the typical direct radio transmissions used by technologies such as Bluetooth.

An excerpt from the Wikipedia page on NFC, Wikipedia NFC page

NFC is a set of short-range wireless technologies, typically requiring a distance of 4 cm or less. NFC operates at 13.56 MHz on ISO/IEC 18000-3 air interface and at rates ranging from 106 kbit/s to 424 kbit/s.
NFC always involves an initiator and a target; the initiator actively generates an RF field that can power a passive target. This enables NFC targets to take very simple form factors such as tags, stickers, key fobs, or cards that do not require batteries. NFC peer-to-peer communication is possible, provided both devices are powered It is meant for applications where a physical touch, or close to it, is required in order to maintain security.
NFC is planned for use in mobile phones for, among other things, payment, in conjunction with an electronic wallet, and for setting up connections between Bluetooth devices (rendering the current manual Bluetooth pairing process obsolete). The technology is promoted by the NFC-Forum.

NFC in action: Google Wallet

Google Wallet

Comparison between Bluetooth and NFC

Bluetooth and NFC are both short-range communication technologies which are integrated into mobile phones. As described in technical detail below, NFC operates at slower speeds than Bluetooth, but consumes far less power and doesn’t require pairing.

NFC sets up faster than standard Bluetooth, but is not faster than Bluetooth low energy. With NFC, instead of performing manual configurations to identify devices, the connection between two NFC devices is automatically established quickly: in less than a tenth of a second. The maximum data transfer rate of NFC (424 kbit/s) is slower than that of Bluetooth V2.1 (2.1 Mbit/s). With a maximum working distance of less than 20 cm, NFC has a shorter range, which reduces the likelihood of unwanted interception. That makes NFC particularly suitable for crowded areas where correlating a signal with its transmitting physical device (and by extension, its user) becomes difficult.

In contrast to Bluetooth, NFC is compatible with existing passive RFID (13.56 MHz ISO/IEC 18000-3) infrastructures. NFC requires comparatively low power, similar to the Bluetooth V4.0 low energy protocol. However, when NFC works with an unpowered device (e.g. on a phone that may be turned off, a contactless smart credit card, a smart poster, etc.), the NFC power consumption is greater than that of Bluetooth V4.0 Low Energy, this is because illuminating the passive tag needs extra power.