The project was started in 2001 and was to develop ID cards for immigrant workers that regularly crossed the border for work. The purpose was to create an ID card that could not be forged or tampered with.
The cards looked very similar to those in section 3.1 -- identifying information and a picture, with a passport-like encoding. Unlike the picture in section 3.1, all of the information was placed on the front of the card. When a new card was produced, the software created a cryptographic hash of the identifying information and the picture which was stored both on the card's mag-stripe and in a central database.
When users were authenticated at the border, the card was placed face-down on an optical scanner much like you see at airports today. The software then computed a hash of both the personal information and the picture. In offline mode the system would compare the hash only to the hash on the mag-stripe, but in online mode the system would connect to the central database to verify the mag-stripe hash matched and existing entry in the central database.
I think the Estonian government used that system for two or three years.
The best part of this setup was that the system did not in any way create a national registry. Instead, it proved the the ID (token) was not tampered with and that the token had indeed been created by a registered government authority.
Funny story: In early testing, I created an ID using my manager's name and a photo of my co-worker's ass. I still have the card at home somewhere. Who knows... it may still be in the database!