Software tokens often take the form of mobile applications that are loaded onto a mobile device such as a smartphone. The software tokens are pseudo random number generators. The software token will present a series of numbers that change in intervals. The authentication piece will know what these numbers are, so you’ll need to submit the numbers as they appear on screen when you log into the system.
The advantage of software tokens is that they can be cheaper than hardware tokens, if you already have a mobile device in your possession. Most are free smartphone apps. It is also advantageous in that it’s harder to lose since it’s in your mobile device versus a hardware token which is separate so it’s something else you’ll need to carry and keep track of and easier to lose.