The Internet of Things (IoT) refers to connecting physical objects to the internet. It will connect 50 billion "smart objects" by 2020. IoT builds on previous technologies like RFID and machine-to-machine communication by giving devices IP addresses and allowing direct interaction over various networks. IoT has potential applications in areas like manufacturing, healthcare, transportation and smart cities. Key challenges to enabling IoT include connectivity, security, interoperability between devices and domains, and handling large amounts of data and traffic.