To be passive could be positive
The passive adjective really applies only to the tags or labels and, in few words, just means that they don’t need any local power (e.g., a battery) to operate.
Not having a battery on the labels have many advantages related to cost, maintenance and reliability making the passive characteristic a key point for the success of the technology.
Anyway, RAIN RFID tags, even if highly integrated, are electronic circuits so they require to be powered in some way to work. Missing a battery, tags need to get the power from somewhere else using a technique called energy harvesting that capture energy from the environment, maybe the most famous example of energy harvesting is solar power where the solar radiation is converted in electricity. RAIN RFID technology uses instead the radio signal coming from the reader: the tag’s antenna gathers the signal and a circuit inside the tag’s chip converts that signal in electric current used to power all the rest of the circuitry.
So, the first part of the communication between the reader and the tags is a “blank” signal, called carrier, that is used just to provide power, a signal that need to be maintained along all the time the communication is in place. The exchange of information is then realized using the same signal, just changing its shape with a technique called modulation so that the energy is maintained but the tag can recognize the changes in the signal shape and interpret them as data. It is something like the USB where a single cable is used both to provide power and to communication with the devices.
So, now that the tag is powered and the reader is sending information that the tag can interpret, how it can reply to reader? RAIN RFID tags do not have any real transmit circuitry, there is not enough power for that. Again, the solution is on a passive technique called backscattering.
Backscattering is basically a signal reflection: the antenna of the tag is a metal object and hence it reflects radio signals, furthermore it is designed to work with radio signals, so it is particularly efficient both on receiving and on reflecting signals. The way how the tag sends information back to the reader is again modulating the reflected signal, the antenna is connected to the chip circuitry that can decide if the antenna must reflect more or less signal (amplitude modulation).
To explain this technique in an intuitive way, imagine two persons, Ann (the reader) and John (the tag), that want to communicate at distance. For doing that Ann has a flashlight and John has a small mirror. First, they need to agree on a language, let say they decide to use the Morse code to encode and decode information. Now they can start to exchange information: Ann emits short and long flashes according to the Morse encoding so that John can decode the light pulses and get the information. After that, Ann holds the flashlight powered to emit a continuous light beam so that John can use his mirror to reflect the light: holding the mirror in front of the light John reflects the light coming from Ann while turning it on a side the light is not reflected so he can send back information to Ann using the same Morse code.
Obviously, this is just an intuitive explanation of a technology that is much more complex, but I hope it can give you a rough idea of how the technology works even to people, like me, that is not an electronic engineer.