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A Magnetic stripe reader, also called a magstripe reader or card reader, is a hardware device that reads the information encoded in the magnetic stripe located on the back of a plastic card. Magnetic stripe readers can be read by a computer program through a serial port (RS232), USB connection, or Keyboard Wedge, and are generally categorized by the way they read a mag stripe card. For instance, insertion readers require that the card be inserted into the reader and then pulled out. Swipe readers require that the card pass completely through the reader.

A magnetic stripe card is a type of card capable of storing data by modifying the magnetism of tiny iron-based magnetic particles on a band of magnetic material on the card. The magnetic stripe, sometimes called a magstripe, is read by physical contact and swiping past a reading head. Magnetic stripe cards are commonly used in credit cards, identity cards, and transportation tickets.  
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Essentially Credit Card Readers are non intelligent input devices that read the magnetic band on magnetic stripe cards and then sends the information from the band of magnetic material on the card into a text form into your computer. Often these devices simulate a keyboard emulation device, most USB models are also plug n play and does not require additional drivers. Other than keyboard emulation MSR's, there are also USB HID MSR's. HID stands for Human Interface Device, these functions allow hardware manufacturers to design a product to USB HID class specifications and expect it to work with any software that also meets these specifications. In essence with the HID you can program or command the device / MSR to type the data in specific path on the computer or specific location on a program.

Also to note are the tracks on card readers, generally you have options to having up to 3 tracks. Tracks 1 & 2 are generally used for credit cards. Track 3 is for reading other cards such as ID cards, gift certificate cards, etc. MSR's are generally sold with tracks 1 & 2 only or with all 3 tracks 1,2,3.
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