In The Mandalorian, I suspected that maybe Baby Yoda had a tracking device on him. But there’s no evidence of that. Mando also chose that planet and farm because it’s desolate. So how did that bounty hunter track him?
Tracking fobs are not yet explained in-universe. But the guild uses them to track down the targets. Other targets from the first episode also were tracked with the same device. The Child was also tracked with it in the second episode, before the procedure. I don't think that they are based on an implant - if someone can find the target and implant them, they don't need a bounty hunter to find the target.
They probably work based on DNA to track the target.