What is token authentication?

Token technology is another method that can be used to authenticate users. Tokens are physical devices used for the randomization of a code that can be used to assure the identity of the user. Tokens provide an extremely high level of authentication. 

There are different types of tokens. A particular type token is a small device with a keypad to key in values. The server issues a challenge with a number when the user try to login. The user keys this number into the token card, and the card displays a response. 
The user inputs this response and sends it to the server, which calculates the same result it expects to see from the token. If the numbers match, the user is authenticated.

Another type of token is based on time. This type of token display numbers at different intervals of time. The user who needs the authentication should key in this time based values also at the time of authentication. If the value from the token matches a value the server has calculated, the account is authenticated, the user is allowed access.