Bluetooth is a proprietary wireless technology intended for short-range communication that is overseen by the Bluetooth Special Interest Group. It provides a secure, robust, low power, and low cost method for exchanging information between devices. Because it is a global standard, any Bluetooth-enabled device can communicate, or "pair", with any other. A Bluetooth device can also connect with up to seven other devices in an ad-hoc personal-area network called a "piconet", and be a member of several piconets at the same time. Bluetooth uses a technology called frequency-hopping to ensure that it is resilient against interference. 
The Bluetooth Special Interest Group (SIG) was created in 1998 by five companies (Ericsson, Nokia, IBM, Toshiba, and Intel) "to establish a de facto standard for the air interface and the software that controls it." 
By the end of their first year, SIG had 400 member companies, and the first Bluetooth Specification was released in 1999. Despite numerous problems with the initial specifications, mobile phones with Bluetooth capabilities started being released in 2000. In 2012, Bluetooth SIG membership exceeded 16,000 companies. The most recent specification is Bluetooth Core Specification version 4.0, which contains many significant improvements over the initial specification and is the Bluetooth we know today.
Bluetooth is based on frequency-hopping spread spectrum radio technology, making use of a packet-based structure in a master-slave arrangement. That is, information is transmitted in discrete chunks known as packets, and in each piconet, there exists a master device that dictates which of the other (slave) devices it is communicating with. Devices can also switch roles from master to slave and vice versa, and they belong to multiple piconets, where they are master in one network and slave in another. These two connected piconets are then referred to as a "scatternet". 
Information is passed between the master of a piconet and one of its slaves at any given time. All communication is done on radio frequencies in the Industrial, Scientific and Medical (ISM) 2.4 GHz range, and so though it does not require a direct visual line of sight in order to operate, it does require radio line of sight, which can pass through most non-metallic objects. Bluetooth uses a low-powered signal; there are three classes of radios used in Bluetooth devices, with the shortest range being Class 3 radios (whose maximum power output is 1mW, producing a range of up to about one meter) and the longest-range being Class 1 radios (with a maximum output power of 100 mW and a range of 100 meters). 
Bluetooth utilizes frequency-hopping spread spectrum technology to avoid interference problems. The ISM 2.4 GHz band is 2400 to 2483.5 MHz, and Bluetooth uses 79 radio frequency channels in this band, starting at 2402 MHz and continuing every 1 MHz. It is these frequency channels that Bluetooth technology is "hopping" over. The signal switches carrier channels rapidly, at a rate of 1600 hops per second, over a determined pattern of channels. There are six defined types of hopping sequences.
Information is conveyed by modulating the carrier channel frequency, using one of several modulation schemes. Gaussian frequency-shift keying (GFSK) modulation was initially the only type available, but recently other varieties have been enabled. GFSK is simply a type of frequency-shift keying (FSK), which is a modulation scheme where the bits of the transfered information correspond to discrete frequency changes in the carrier signal. The carrier signal is whichever band the device happens to be using at that moment (before it hops to another), and the modified signal is broadcast out. 
Because Bluetooth uses this frequency-hopping scheme, it is very unlikely that there will be much interference from other devices, be they Bluetooth or not. Given that the hopping patterns are pseudo-random, the chances that another Bluetooth device would use the same pattern and disrupt a large amount of data-flow is very low. Additionally, other devices that simply broadcast at a fixed frequency can only have a minimal impact on the data transferred using Bluetooth.
While Bluetooth is intended to be a safe protocol for wireless transfer of data, and is often touted for its security, it does have its flaws. It is beyond the scope of this article to delve into the numerous vulnerabilities of a system like Bluetooth, but it suffices to say that Bluetooth devices are susceptible to a number of attacks, including eavesdropping, man-in-the-middle, and denial of service attacks. The National Institute of Standards and Technology has published a Guide to Bluetooth Security detailing the vulnerabilities of Bluetooth and recommendations for dealing with them. 
© Graham Roth. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
 J. Haartsen, "Bluetooth - The Universal Radio Interface for Ad Hoc Wireless Connectivity." Ericsson Review 3, 110 (1998)
 J. Haartsen et al., "Bluetooth: Vision, Goals, and Architecture," ACM Mobile Comp. Commun. Rev. 2, No. 4, 38 (1998).
 J. Bray and C. F. Sturman, Bluetooth 1.1: Connect Without Cables, 2nd Ed. (Prentice Hall, 2001).
 R. K. Morrow, Bluetooth Operation and Use, (McGraw-Hill, 2002).
 K. Scarfone J. and Padgette, "Guide to Bluetooth Security," U.S. National Institute of Standards and Technology, NIST SP-800-121, September 2008.