Let's say I lived in Maryland in 1740 and wanted to buy a new wagon wheel from the local store.  How could I pay for it?

Since tobacco served as money, I could offer the merchant a certain weight of tobacco, say 100 pounds, in exchange for the wheel.  The merchant might not be too comfortable with this, since he knows that I might try to hide some "bad" tobacco with high quality tobacco.  Even if I brought the bulk tobacco with me (as opposed to leaving it in the warehouse), the merchant still might not be able to determine its worth.

The Maryland Tobacco Inspection Act of 1747 changed all of that.  Now, all tobacco had to be inspected by colonial inspectors.  Once the tobacco was inspected, tobacco "notes" were issued that certified the quality.  Whoever held these tobacco notes owned the tobacco.  Thus, I could pay the merchant 100 pounds of tobacco by simply signing over the notes to him.  That way, he could go to the warehouse with the notes in hand and claim the tobacco as his.

There is another way that I could pay for the wagon wheel with tobacco.  I could give the merchant an I.O.U. that promised to pay him 100 pounds of tobacco in the future, when my crop came in.  Before the Inspection Act, the merchant would be less willing to accept this I.O.U., since he would not be sure of the quality of tobacco.  After the Inspection Act, the I.O.U. could promise to pay in "certified" tobacco.

Paper tobacco notes more easily functioned as money because bulk tobacco was hard to transport and the quality of tobacco was assured.