NFC is Near Field Communication. The physical chip is, I believe, embedded in the battery. It's technology used for Google Wallet and other data transfers between two devices. Settings>More>NFC to turn it on or off.
You might like to check out the link for more info. NFC Samsung Galaxy S3 NFC Near Field Communication demonstration - YouTube (http://www.youtube.com/watch?v=MPpVCa88T6g)
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