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Home Automation, also known as making a home a "smart home", is the process of firstly providing remote on/off facilities for appropriate appliances, particularly lights. Once the remote capability is in place automation and sophistication can be applied. There are a number of ways that this can be achieved. In the simplest way, this can include adding a timer plug to a lamp, so the lamp turns on and off automatically. It can also be as advanced as hooking up a computer, and telling the computer to turn on and off your lights, lamps, coffee makers, television, and just about anything else that can be left "on" when unplugged, or controlled by remote signals.
In extreme installations, rooms can sense not only the presence of a person but know who that person is and perhaps set appropriate lighting, temperature and music/tv taking into account day of week, time of day and other factors.
Other automated tasks might be setting a/c to adjust to an energy saving setting when the house is unoccupied and resetting so that the proper conditions are establish when an occupier is due to return. More sophisticated systems can maintain an inventory of products recording their use (through perhaps an Rfid tag) and preparing a shopping list or even ordering replacements automatically.
There are different technologies that can be used to automate a home.
The X10 technology is based on sending bits when the AC current reaches the 0-mark. This means that wires don't need to be run between devices.
The Z-Wave interface is based on communicating wirelessly. Although the same principles apply (For example, regular switches are replaced with a z-wave switch), there are no problems with devices not being reachable perhaps due to a three phase installation or use of electronic noise filters. Also, each z-wave device also repeats any commands it hears, so nearby devices can hear them as well.