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The correct answer is option 2, i.e., statements 1 and 2 are correct.
Statement 1, "Smart Card is a plastic card with an embedded microchip" is accurate. Smart cards do have an embedded microchip that can store and process data.
Statement 2, "Digital technology is primarily used with new physical communication medium such as satellite and fibre optics transmission" is also right. Digital technology significantly utilizes these advanced physical mediums for effective communication transmission.
However, statement 3, "A digital library is a collection of documents in an organized electronic form available on the Internet only" is incorrect. A digital library is not solely dependent on internet access. These documents can be accessed offline as well, not only on the internet. Hence, this option is not correct. So, options involving statement 3 are incorrect, leaving us with option 2 as the correct one.