Traditional cryptography is based on the sender and receiver of a message knowing and using the same secret key: the sender uses the secret key to encrypt the message, and the receiver uses the same secret key to decrypt the message. This method is known as secret-key or symmetric cryptography. The main problem is getting the sender and receiver to agree on the secret key without anyone else finding out. If they are in separate physical locations, they must trust a courier, or a phone system, or some other transmission medium to prevent the disclosure of the secret key being communicated. Anyone who overhears or intercepts the key in transit can later read, modify, and forge all messages encrypted or authenticated using that key. The generation, transmission and storage of keys is called key management; all cryptosystems must deal with key management issues. Because all keys in a secret-key cryptosystem must remain secret, secret-key cryptography often has difficulty providing secure key management, especially in open systems with a large number of users.

The primary advantage of public-key cryptography is increased security and convenience: private keys never need to transmitted or revealed to anyone. In a secret-key system, by contrast, the secret keys must be transmitted (either manually or through a communication channel), and there may be a chance that an enemy can discover the secret keys during their transmission.

Another major advantage of public-key systems is that they can provide a method for digital signatures. Authentication via secret-key systems requires the sharing of some secret and sometimes requires trust of a third party as well. As a result, a sender can repudiate a previously authenticated message by claiming that the shared secret was somehow compromised by one of the parties sharing the secret. For example, the Kerberos secret-key authentication system involves a central database that keeps copies of the secret keys of all users; an attack on the database would allow widespread forgery. Public-key authentication, on the other hand, prevents this type of repudiation; each user has sole responsibility for protecting his or her private key. This property of public-key authentication is often called non-repudiation.

A digital signature is superior to a handwritten signature in that it attests to the contents of a message as well as to the identity of the signer. As long as a secure hash function is used, there is no way to take someone's signature from one document and attach it to another, or to alter a signed message in any way. The slightest change in a signed document will cause the digital signature verification process to fail. Thus, public-key authentication allows people to check the integrity of signed documents. If a signature verification fails, however, it will generally difficult to determine whether there was an attempted forgery or simply a transmission error.

A one-way function is a mathematical function that is significantly easier to perform in one direction (the forward direction) than in the opposite direction (the inverse direction). It might be possible, for example, to compute the function in seconds but to compute its inverse could take months or years. A trap-door one-way function is a one-way function where the inverse direction is easy given a certain piece of information (the trap door), but difficult otherwise.

Public-key cryptosystems are based on (presumed) trap-door one-way functions. The public key gives information about the particular instance of the function; the private key gives information about the trap door. Whoever knows the trap door can perform the function easily in both directions, but anyone lacking the trap door can perform the function only in the forward direction. The forward direction is used for encryption and signature verification; the inverse direction is used for decryption and signature generation.

In almost all public-key systems, the size of the key corresponds to the size of the inputs to the one-way function; the larger the key, the greater the difference between the efforts necessary to compute the function in the forward and inverse directions (for someone lacking the trap door). For a digital signature to be secure for years, for example, it is necessary to use a trap-door one-way function with inputs large enough that someone without the trap door would need many years to compute the inverse function.