Chris Gulker posted a piece on his blog about a visit to Sun where they use Java Cards as employee badges. Simply insert one of these into any thin client and you're logged in with your environment. Chris concludes:

. You could sell me on the idea of a Java card slot on every computer... anywhere you go, just pop in your card...

These little smart cards with a Java VM on them are manufactured by Schlumberger and others. These cards have something like 64K of memory on the card. Its not clear to me, in the application Chris describes, what use is being made of the JVM on the card. An onboard processor could buy you the ability to process keys on the card and not transfer them to the host machine. Absent that, you could do the same thing with any smart card and a good enterprise-wide directory.