A magnetic stripe (aka mag stripe or magnetic strip) is a small strip of magnetic tape that is adhered to the back of a plastic card (drivers license, credit card, gift card, membership card, etc.) which contains information; typically about the card holder.
A magnetic stripe typically contains three lines or tracks of information such as cardholder name, ID number, address, account number, etc. The third track is usually reserved for the financial industry.
The information contained on the tracks is read by a magnetic stripe reader and transmitted to a computer system for processing.
Different types of cards have different data layouts, depending on the usage. For an example of the data layout on a U.S. drivers license, see the following article:
Wikipedia_Magnetic_stripe_US_licenses
There are two types of magnetic stripes: high-coercivity (HiCo) and low-coercivity (LoCo). Most commonly you will find that LoCo stripes are light brown, and HiCo stripes are very dark brown (almost black).
This is a very good article. I would like to add that the best magnetic stripe readers are manufactured by Card Reader Factory
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