There are a lot of conversations about chip and pin and how it would apply to Target.Chip and pin was developed to help with card present fraud and reduce the potential of duplicating an entire credit card by capturing the data at the point of sale (Target), on the wire (RaceTrac skimmers, Ethernet taps) , or at the processor (Heartland). Chip and pin does require or support encryption of the card number (PAN); it is still sent in clear text to the processor and banks. In truth, chip and pin would do nothing for Target as they have host their own processor. Bad actors had control of registers and potentially their payment processing systems, obtaining enough information to make counterfeit cards. In this scenario, the only solution that would help Target would be end-to-end encryption. Encrypt at the pin pad, decrypt at the bank. Nowhere is the card number or any track data in the clear on the retailer or processor network.
Instead of spending money on chip and pin which does not address the card not present problem, banks (and retailers) should be lobbying for end-to-end encryption. Many current readers are capable of encrypting at the swipe (or chip read). If you are upgrading to support chip and pin, your new pin pad will support encryption too.