How do the Skylanders figurines work?

Solution 1:

The figurines work through RFID, they've already been hacked by someone but he got a C&D from Activision so the project is pretty much dead.

Solution 2:

The data for the figurines is stored using an RFID chip in the base of the figurine. The protocol was figured out by Brandon Wilson and a copy of the protocol description + code implementing the protocol can be found here and a few other places. http://www.xbox-hq.com/html/postx26304-0-0.html&sid=8a8de67aa9cb04f1844b2c563b3d98fc (The name of the tool is the Skylander Editor). However, AFAIK the way the portal is set up the first block of data for each figurine (which gives the character ID) is read only. So, if you really want to reprogram a figurine to be a new character you would likely need to use an Android phone to rewrite the RFID data on the figurine directly to change the character to something else. Either that, or hack the game itself.