Following the article on LastPass password manager I mentioned I am using Two Factor Authentication in a couple of ways. One of those ways is via a physical device called Yubikey, which I have on my physical key chain at all times.
Yubikey is a hardware USB “dongle” that I plug in to my computer on an empty USB slot. It is really quite simple: I have paired it with my LastPass account and the Yubikey contains an encrypted string. It does not need to be installed on your computer. It just works.