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Advances in the areas of embedded systems, computing, and networking are leading to an infrastructure composed of millions of heterogeneous devices. These devices will not simply convey information but process it in transit, connect peer to peer, and form advanced collaborations. This “Internet of Things (IoT)” infrastructure will be strongly integrated with the environment. This paper focuses on researching on the architecture and key technology of Internet of Things. Moreover, the applications of Internet of Things are interpreted in this paper. Especially, the application of IoT in smart grid is emphasized. The work presented here proposes the principal characteristics for an effective integration of the Internet of Things in smart grid.