I adopted a dog one time that we KNEW had a microchip, but none showed on the scanner. Then the veterinarian scanned it himself, and found that the chip had moved down the leg. One more thing that can happen with microchips.
For definite identification, I prefer a tatoo. But my dog only has his collar off, briefly, for grooming. I ordered an ID tag for him from a company that makes very good, very readable tags for a reasonable price. I had in the past bought tags that "faded" rather quickly. I may be getting the terminology wrong, but I think the tags that became illegible were engraved. The ones I've found that I like best are stainless steel and the lettering is deep--I think it's called embossed.
But if you crate a dog, it's not safe to leave a collar on in the crate. Oy. And a collar a dog wears all the time has to be just the right shape for that dog's activities and exactly the right size. Dogs can get hurt on collars, so we have to be careful.
If a dog has a collar on with proper ID, someone who finds that dog lost will be able to contact you and you can directly go get your dog. No trip to the animal shelter, far less stress for the dog, and also less risk of catching something contagious, so common in shelters.
But, you have to keep that collar on, and you have to make sure you have a good, readable tag with current information on it!
I've had some dogs tatooed, and that can be a very good backup. It needs to be done on the side of the tummy, not an ear. One argument is that people finding a lost dog are not going to check there. That depends on a lot of things. But the tatoo can be a very good way of identifying the dog.
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Kathy Diamond Davis, author, "Therapy Dogs: Training Your Dog to Reach Others," 2nd edition, and the free Canine Behavior Series articles at http://www.veterinarypartner.com/Content.plx?P=SRC&S=1&SourceID=47