Smart locks, smart thermostats, smart cars — you’ve probably heard some of these terms lately, and you’re going to hear of them even more. But what are these things exactly — and what makes them so smart?

These devices are all part of an emerging category called the Internet of Things, or IoT for short. The Internet of Things is emerging as the next technology mega-trend, with repercussions across the business spectrum.

So what exactly is the Internet of Things?

At its very basic level, IoT refers to the connection of everyday objects to the Internet and to one another, with the goal being to provide users with smarter, more efficient experiences. It is a scenario in which objects, animals or people are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction. A thing, in the Internet of Things, can be a person with a heart monitor implant, an automobile that has built-in sensors to alert the driver when tire pressure is low — or any other natural or man-made object that can be assigned an IP address and provided with the ability to transfer data over a network.

How does this impact you?

The Internet of things is on track to be a $71 billion industry by 2018. A future where your refrigerator knows when you’re out of milk and your thermostat can adapt to your personal preferences and behaviors is no longer far-fetched.

The analyst firm Gartner says that by 2020 there will be over 26 billion connected devices.

But why on earth would you want so many connected devices talking to each other? There are many examples for what this might look like or what the potential value might be. Say for example, you are on your way to a meeting, your car could have access to your calendar and already know the best route to take, if the traffic is heavy your car might send a text to the other party notifying them that you will be late. What if your alarm clock wakes up you at 6 am and then notifies your coffee maker to start brewing coffee for you? What if your office equipment knew when it was running low on supplies and automatically re-ordered more?

All of these connected devices are being handled by automatic systems over a wireless network. The result? You have a smart home, thanks to smart appliances, as well as a smart car and a smart office. In a nutshell: you have a smart life. Say hello to the Internet of Things.

On a broader scale, IoT is being used by cities to monitor things like the number of available parking spaces, air and water quality, and traffic.

What is an existing IoT device?

There are many IoT devices in existence, but the Nest thermostat is probably the most popular at the moment. This Wi-Fi-connected thermostat allows you to remotely adjust the temperature via your mobile device and also learns your behavioral patterns to create a temperature-setting schedule.

The potential value is that you can save money on your utility bill by being able to remotely turn off your air conditioner, which you forgot to do before leaving the house. There’s also a convenience factor. Nest can remember that you like to turn down the temperature before going to bed, and can automatically do that for you at a set time.

Who coined the Internet of Things?

Kevin Ashton, co-founder and executive director of the Auto-ID Center at MIT, first mentioned the Internet of Things in a presentation he made to Procter & Gamble. Here’s how Ashton explains the potential of the Internet of Things:

“Today computers — and, therefore, the Internet — are almost wholly dependent on human beings for information. Nearly all of the roughly 50 petabytes of data available on the Internet were first captured and created by human beings by typing, pressing a record button, taking a digital picture or scanning a bar code.

The problem is, people have limited time, attention and accuracy — all of which means they are not very good at capturing data about things in the real world. If we had computers that knew everything there was to know about things — using data they gathered without any help from us — we would be able to track and count everything and greatly reduce waste, loss and cost. We would know when things needed replacing, repairing or recalling and whether they were fresh or past their best.”