Could anyone explain to me in simple programmatic terms how these RSA key dongles work? I know Blizzard has them for WoW and paypal as well as some of the trading sites.
The fob has a clock and a serial number that is used as a seed for a PRNG. When you hit the "show me a code" button, the fob displays a number that is the product of that timestamp and the serial number run through the PRNG. The server knows your fob's serial number and time, and does the same operation. If your codes match, you're authenticated.
You can calculate the previous/next N values on the server end to account for clock skew.