I see lots of useful things to do with this, none of which involve privacy issues--finding stuff around the house (if the tags are cheap enough), keeping track of school-owned equipment on a campus ("Where is that multimeter, anyway... oh, Room 252."), animal tracking, and so on.
The problem is, like an above poster said, the eventual potential for abuse is massive and frightening.
Let's say it takes off, and after the first "Amber" is brought home by a tag everybody runs out and gets their kids subdermally tagged, and the proliferation of base stations make the tracking range near-ubiquitous. Add to that things like tags in keys, jackets, and wallets, and eventually even if you don't have one implanted you're still carrying at least a couple around with you wherever you go.
Then Ashcroft, or some government agency ten years from now, decides that they'd like to start keeping an eye on people... bingo, the network is already established, and they don't even have to mark everyone with the number 666 (or, for those less religiously inclined, Big Brother's wet dream come true--monitoring without the vidscreen). You'd never even know when they started.
Of course, the technology exists and will only get better, cheaper, and smaller, so it's only a matter of time before it's essentially unavoidable if someone wants to abuse it, even if people don't take a liking to it. The only issue is how ready everyone is to deal with the implications.
