This item from the blog Strategypage is interesting. I would guess that it is good to make enemies think you have stuff that may not exist. I've read about "magic dust" for some time, but don't know how well it really works.

Smart Dust Stalked Zarqawi
June 10, 2006: For the last ten years, development of "smart dust" has moved right along. "Smart Dust" is basically very miniaturized electronic devices. This is similar to stuff like RFID, smart cards, EZ Pass and those rice grain size tracking devices you can have injected into your pets. But Smart Dust takes this all to a new level by being small enough to be disguised as dirt, the kind you can pick up in your shoes or clothing. Each bit of Smart Dust can be given a unique serial number that, when hit with an "interrogation signal" from troops on the ground, or aircraft overhead, is broadcast back. Some forms of Smart Dust are believed to be in use in Iraq and Afghanistan. It's also believed that Smart Dust played a role in the recent death of al Qaeda leader Abu Musab al Zarqawi. In this case, if someone were able to sprinkle some Smart Dust on Zarqawi's clothing, it would have been a simple matter to track him with great precision. Iraqis have already heard of this stuff, but regard it more as "magic dust." Iraqis have a tendency to exaggerate American capabilities, especially when it comes to technology. But U.S. troops have learned to use this exaggerated reputation to their advantage, threatening Iraqis with magical capabilities that don't exist. That often works, just like smart dust.