As you’ve probably heard, earlier this week Starbucks knighted Square as the core payment processing engine at its 7,000 U.S. locations. Now a few days later, its time to clear some things up and talk about the finer points: boosted awareness and adoption of Square (and of mobile payments in general).

First, there’s been some confusion about the nuts and bolts of this arangement. To explain it requires stepping back and looking at Squares current offerings

1. Hardware dongle for iphones and ipads to swipe credit cards, in tandem with Square’s apps.

2. iPhone app: Known as Square Card Reader, this is a low-barrier solution for the long tail of SMBs hampered by traditional hurdles of accepting credit cards (bank relationships, monthly minimums, etc.). It’s been great for food trucks, farmers markets etc. This is the Square you’ve probably heard most about

3. iPad app: Known as Square Register, it is a beefed up version of the iPhone app that allows larger merchants to not only accept payments but track inventory and analytics. This is meant to replace a cash register altogether, rather than the lower barrier portable solution of point #2. As it develops we believe this will incorporate all kinds of marketing and loyalty programs that utilize purchase data.

4.“Pay with Square”: The consumer facing app that lets users search and discover nearby businesses that accept Square. This ties in with the iPhone and iPad apps as follows: When you’re close enough to the business or in the store itself, you can hit a “pay with square” button which triggers the merchant’s app to detect your presence. Your name and picture pop up so that the teller can authenticate you visually. After a few screen taps, you’re paid up with receipt email or texted to you. No card swipe.

The Starbucks deal essentially involves customized versions of #3 and #4. But there won’t be iPads and dongles but instead a software integration to Starbucks’ existing POS. In other words, Starbucks employees won’t be forced to fumble with Square dongles, iphones or ipads as many initially imagined.

As for the consumer facing process, the Pay with Square integration is the end game but won’t be available until the fall. In the meantime, Square will integrate with Starbucks’ existing “Card Mobile” payment infrastructure, which we wrote about here.

Just as that system requires users to launch the Starbucks app and flash their phone screen — containing a unique barcode — in front of the POS scanner, Pay with Square will soon offer that same redemption method. And Starbucks’ app will in turn list nearby SMBs that accept Square.

But the end game of course is simply walking up to a register tapping “Pay with Square” and authenticating your identity before you’re on your way. There are of course some potential hiccupps and security challenges that I won’t get into now.

The main point is that when/if kinks are hammered out and intended adoption levels are reached, it should do wonders for Square’s overall awareness and adoption.  And it should do the same for the general acclimation and comfort levels of paying for things with a phone.

This of course could have some adoption challenges with the mainstream consumer buying public but Starbucks is a good place to start, given its customer base’s higher than average index of income and technical savvy. Start with the influencers, yada yada…

Square also clearly wins here — not just in additional distribution and awareness but picture all of the people opening Pay With Square to pay at Starbucks. Through that process, they’ll run across “nearby places that accept Square”, central to the app’s experience.

Those nearby businesses could see more action, and adjacent merchant adoption could in turn result via competitive pressure or simply osmosis.  And Square will inch ahead in the battleground for mobile payments standards, adoption, and market education.

We’ve long said the “chicken and egg” standards war in mobile payments (NFC, barcodes, etc) comes down to comfort levels. Also, that it will be won by whomever gets endorsed/implemented by a retail powerhouse like Wal-Mart. Square just took a gigantic step forward in that respect.

There other details such as how Square and Starbucks loyalty programs will merge, store layouts/logistics, security and lots more that will come to light as implementation happens over the next few quarters.  Meanwhile, we can view it as huge milestone for mobile payment adoption.