Bluetooth. I think AirTags will most likely use some combination of bluetooth and the new U1 chip included in the iPhone 11 Pro which should hopefully give it more granularity than a plain old bluetooth tracker would.
The ultra-wideband U1 chip is going to be the main push behind AirTags. As I understand it, with 3+ devices close to each other, you can pinpoint the exact location of any of the other devices, so I imagine there will be an app for finding your AirTags in AR by moving your phone's camera around.