Quantum cryptography is an emerging technology in which two parties may sim
ultaneously generate shared, secret cryptographic key material using the tr
ansmission of quantum states of light. The security of these transmissions
is based on the inviolability of the laws of quantum mechanics and informat
ion-theoretically secure post-processing methods. An adversary can neither
successfully tap the quantum transmissions, nor evade detection, owing to H
eisenberg's uncertainty principle. In this paper we describe the theory of
quantum cryptography, and the most recent results from our experimental fre
e-space system with which we have demonstrated for the first time the feasi
bility of quantum key generation over a point-to-point outdoor atmospheric
path in daylight. We achieved a transmission distance of 0.5 km, which was
limited only by the length of the test range. Our results provide strong ev
idence that cryptographic key material could be generated on demand between
a ground station and a satellite (or between two satellites), allowing a s
atellite to be securely re-keyed in orbit. we present a feasibility analysi
s of surface-to-satellite quantum key generation.