The microchip method of identifying your pet became popular for regular pet owners after the AKC endorsed this method of identification. The American Kennel Club decided that there needed to be another way to keep track of lost animals with permanent identification much in the same way that zoologists have been using in the field for years. The AKC also created a program called Companion Animal Recovery that began to educate the public on using this new technology to find lost and stolen pets as quickly and as safely as possible.
The benefits to "chipping" your dogs are many. Once the microchip is inserted under the skin it is there for life. The chip is only activated when it is scanned, so there is no continual computer parts going off in your animal and each one is fitted with an anti-migration cap to ensure that it won't be off floating around in the body. Every chip holds individual information, so what is encoded on to the chip remains the same once inside your dog. Also, within each chip is an antenna and a capacitor inside a very tiny glass tube. All three components are what makes the chip work.
Now there are two main manufacturers of the microchip: AVID and Schering-Plough Animal Health. The problem with this is that both companies have created chips that can only be read by their brand scanners. So, let's say you have an AVID chip in your puppy but they are found by a shelter that carries a Schering-Plough chip and vice versa. What this may mean is that your puppy will not be identified using the microchip unless the shelter employs the use of both types of scanners. This is why it is suggested that your pet should have the microchip, be tattooed and wear a regular collar with identification tag at all times.
There is another down side to going the microchip route as a means for identifying your lost dog. Before the microchip was popularized for use by the AKC there had not been any extensive study done of the effects on dogs in using a product that had already been shown to cause cancer in lab mice. So far, there has only been one documented case from 2006 of a dog contracting cancer from a microchip. Leon, the French bulldog who contracted the cancer has had both the chip and the tumor successfully removed in 2004 and has had no reported reoccurrence. The standard of tumors developed in lab rats and mice are always around the microchip itself.
The decision to microchip your dog should be an individual one. Talk with your vet, see what options are available and also look into the companies behind the chip for the most information possible. Just as can be the case with human medical type treatments not all things promoted in your vet's office is something that you or your pet needs.