I thought I would take a moment to discuss proper identification of your pets. There are many things to consider, but the most important thing is to make sure your pets have some sort of identification on them at all times. Your pet will not get lost when you are prepared- it is only when you least expect it that these accidents occur. That is why it pays to be a bit obsessive about identification. Lost pets wearing ID are exponentially more likely to get back to their owners than those pets without ID. They are also less likely to be assumed to be dumped or stray by passers by. 

Obviously, the first thing people think of is tags, and tags are important because anyone who finds your lost furry friend is likely to be looking for collar and tags. Rabies tags and license tags are important, but they won’t help a regular person (who is most likely to find Fido or Fluffy) return your pet to you, especially on the weekends when places like veterinarians and animal control offices may be closed. These tags will, however, assure the finder that this pet is someone’s companion and is more likely to be healthy and vaccinated. The best tag to put on your pet is a personal identification tag. This is a tag with your name and or your pet’s name, and a good phone number and/or address. An address will allow a finder to simply return your pet to your home, while a phone number will allow the finder to contact you. Keep in mind that an animal control officer may not take your pet directly back to your home, but even if your pet ends up at the local pound, the animal control officer will be able to call you and let you know how to reclaim your pet if they have some way to identify the pet as yours (such as a tag). It is imperative that the address or phone number be accurate and up to date- otherwise no one will be able to contact you and the tag does no good. Tags that are dinged up, chewed on, or heavily tarnished may be hard or impossible to read, so check your tags regularly. Tag protectors and pockets such as the Quiet Spot help tremendously in this area.
One big problem with tags is that they come off. This is fairly common, especially with a dog who likes to run through thick underbrush. It is more common for the S-hook rings to fail than for the keyring type connector to fail, in my experience. However, if your dog regularly loses his tags, try putting your information directly on the collar. There are many options to do this. You can buy a personalized collar with identifying information such as a name and phone number embroidered directly onto the collar. Also, you can buy a plate-type tag, which fastens directly onto the collar. This tag can carry the same information as other tags, but instead of dangling below the collar, it is fastened onto the fabric of the collar so that it is parallel and flush with the collar, making it much less likely to get torn off accidentally. This bracket type tag is also good for cats, as regular tags are more likely to catch on random things as they prowl about. Also, if your pet is sound sensitive, a bracket type tag or the embroidered collar is the way to go- no jingling to cause your pet to fret, and yet your pet remains identified.
Even the best fitting collar will sometimes get accidentally torn off. This usually happens with cats, as they are prone to prowling in closed-in spaces they can barely squeeze through. This habit of cats is why they should wear quick release safety collars, so they don’t run the risk of accidentally strangling themselves. However, if the safety collar does its job and comes off when it gets caught, any identification that was on the collar is now lost with the collar. The same is true for the dog who happily tears into thick brush and loses his collar along the way. This is why it’s important to have a second line of defense, especially for cats. This back up identification should be a permanent ID, meaning a tattoo or a microchip.
Tattoos and microchips work the same way. Your pet is identified with a unique code. Once the tattoo or microchip company is called and is given the code, they can direct you to the contact information for the owner. This of course is only as good as the contact information, so again it is imperative that you keep this information up to date. Most often, this information gets out of date when the pet changes hands and the new owner does not update the information with the ID company, but this can also happen if the owners move. So, tattoo or microchip? Neither is better, but they both have their own pros and cons. For cats, I would recommend a microchip hands down. For dogs, personal preference rules. 
Microchips have become very common in recent years, and many veterinarians, animal control officers, and shelters carry microchip scanners, which can read the code of the microchip embedded in the animal’s skin. However, there is a fairly high failure rate, and this is compounded by the fact that many of the older microchips would migrate over time, so that a microchip that had been inserted between the shoulder blades may eventually be found in the back leg or some other part of the body. The scanner usually has to come within inches of the chip to read it, so it is imperative that the person using the scanner scans slowly over the pet’s entire body (usually impossible with feral or panicked cats and sometimes dogs) before concluding that the pet is not microchipped. When I worked at the shelter, there was one dog that we all swore we had seen before. Over the course of two weeks, we scanned her four or five times, making sure to be slow and thorough each time. Each time, the scanner showed no chip. Eventually, the owner called looking for her, and said she was chipped. We scanned again. No chip. We scanned one last time. Finally, the chip registered. Fortunately, this dog had a happy ending and was reunited with her family, but it was a dramatic illustration for us of the fact that microchips were not infallible. However, they are very quick to install with only minor pain (like a shot), fairly cheap, and they are supposed to last for a life time.
Tattoos are another way to go. They are less common now and few people look for them unless tipped off that a tattooed animal is missing. However, they have been in use longer than microchips, and have a good track record as far as safety goes. They are painless to apply, but the buzzing of the pen may make some pets nervous (although peanut butter and belly rubs usually help). A properly applied tattoo lasts for the pet’s lifetime, but long hair may obscure it (leading some pet owners to regularly shave the tattoo area). A tattoo is a visual indicator, so you don’t have to worry about a scanner failing, however, if no one looks for the tattoo or if it is hidden by fur, it may still be missed. Tattoos are generally applied on the ear or on the back leg.
What do my pets wear? The dogs wear buckle collars all the time with a personal identification tag, a license, a rabies tag, and a tattoo tag (Lenny also has his humane society tag). These tags are kept safely tucked inside Quiet Spots, although i have in the past used tag protectors which run along the outer edge of the tags with good results. The cats wear safety collars at all times, each with a plate-type personal ID tag on them. When Lenny works area searches, he wears a bright orange personalized buckle collar with contact information embroidered on it. Both of my dogs are tattooed and my cat ZugZug is tattooed. My cat Friendly is microchipped. All of their numbers are stored in a fireproof safe in my house, just in case. Regardless of having the paperwork on hand, though, I rest easy knowing that should my pets ever go missing and should they slip their collars, they still have a good chance of coming home since they have the back up, permanent identifiers. 
How are your pets identified?