To understand "unmasking" it may be helpful to get down to a procedural level. How does that occur, and why? The circumstances in which unmasking is requested by a government official near the top of the food chain would normally be something like this. The official receives an intelligence "product" of some sort in which identifying information regarding a US Person (USPER) "minimized"--in other words it is redacted to hide the identity of the USPER because the person who prepared the document judged the USPER's identity to be irrelevant for official government purposes. The official receiving the "product" may disagree--perhaps knowing more about the context of the report--than the lower level preparer. So the official submits a request to unmask the USPER's name. That should be done for an articulable reason, not simply out of curiousity.
The real problem arises when unmasking is not done for articulable official purposes but instead for personal or political reasons--usually as a prelude to leaking the USPER's name to the outside world, which is a crime. A few instances of unmasking by a given official may not be overly troubling, but when unmasking appears to be a pattern of behavior suspicions can arise that the unmasking official is actively seeking information to leak for political purposes. The suspicion arises because it would be unusual to be second guessing the preparers of intelligence documents on such a regular basis. That seems to have been the case with Samantha Power. The problem isn't with the unmasking per se so much as with the use that the unmasked information is put to. In the case of Flynn, of course, it was part of an elaborate frame job. The fact that in administrations prior to the Obama administration unmasking was so rare speaks volumes about the mindset in the Obama administration. However, the difficulty for the investigator of unmasking is to link specific unmaskings to specific leaks by specific individuals. Were you wondering what's taking Durham's investigation so long? If you reflect on the above you'll have some idea. There's a lot of digging involved, and especially with so much activity as we've seen.
As if all this weren't complicated enough, uninformed opinions are regularly advanced to "explain" all this. Dan Bongino and sundance have each came up with what they think is the answer to what should be a non-question: How did the FBI know about Flynn's conversation with Kislyak. It may not surprise you to learn that Bongino and sundance have each came up with different answers. Bongino thinks it came from an illegal use of emergency FISA powers by Obama himself. Sundance thinks it came from a pen register on Flynn's phone.
Me? My answer has always been: it came from a "tech cut". Remember tech cuts? I wrote about them in What does "CR cuts" Mean?
Cuts? In FBI parlance a FISA order is referred to as "technical coverage". Or, simply, a "tech." E.g., Do we have a tech on so-and-so? Can we get a tech on so-and-so? The typed up summaries of telephone conversations captured in that way are referred to as "tech cuts."
Thus, when Peter Strzok and Lisa Page texted on January 3, 2017, about their concern that James Clapper shouldn't share raw "tech cuts" with the White House, we know what they're talking about:
“[Priestap], like us, is concerned with over sharing. Doesn’t want Clapper giving CR cuts to WH. All political, just shows our hand and potentially makes enemies,” Strzok wrote to FBI lawyer Lisa Page on Jan. 3, 2017 ...
CR means Crossfire Razor--the FBI codename for Michael Flynn. On January 3, 2017, Strzok was saying he and Bill Priestap didn't like James Clapper going to the White House with an FBI "tech cut". Gosh, do you think that was the tech cut of the conversation between Flynn and Kislyak? Yeah, me too.
There's no mystery here at all. None. Moreover, everyone involved would have had clearances far above anything needed to view the tech cuts, it's just that Priestap and Strzok didn't think tech cuts--which are internal documents of the FBI not prepared for external dissemination--should be shared like that.
Neither Bongino's nor sundance's theories make any sense at all. The origin of the transcript can be found in standard FISA coverage of the Russian ambassador--but not of Flynn per se, for whom there was no FISA order.
Now, there are atually additional sources of more information on the Flynn conversation that confirm exactly what I just wrote. Let's start with Andrew McCabe.
Andrew McCabe testified about the Flynn/Kislyak conversation to the House Permanent Committee On Intelligence, on December 19, 2017. As you'll see from his testimony, the FBI produced a tech cut for the conversation. What that fact means is precisely that the FBI got it off the FISA that targeted the Russian Embassy. You'll also see in the transcript of McCabe's testimony is that McCabe says Flynn's name was never masked. Why not? The simple explanation--but I'll also offer the longer version later--is because the FBI's Washington Field Office had a Full Investigation open on Flynn--therefore no masking (more below). Why would that be? Because the Full Investigation--unwarranted as it was--gave the FBI an official reason to leave Flynn's name "unminimized" or, to use the common term, "unmasked." Again, more below.
With regard to sundance's fantasy that the conversation was somehow picked up on a pen register, at least two things need to be pointed out. The first is that a pen register is basically an integral part of any FISA order that covers telephony. Second, the phrase that McCabe uses, "the Agency, who I think had the pen on that response," is easily explained as not pertaining to any pen register at all. While it's true that "pen" is sometimes used as shorthand for "pen register", it can't possibly mean that in this instance. The FBI is the lead Counterintelligence agency for the US--if any agency had a pen register on Flynn's phone it would be the FBI, not some other agency. On the other hand, the context alone makes it clear that "pen" does not = pen register here. "The pen on the response" can only mean, the agency that will be writing the response. "The pen register on the response" to a tasking makes no sense at all.
With that lengthy intro, I've pasted in below the relevant part of McCabe's testimony. Appearing with McCabe as his lawyer, by the way, is James A. Baker, General Counsel for the FBI. Baker was basically disgraced former FBI Director James Comey's lawyer for official purposes, and now figures prominently in Durham's investigation. Dem Rep. Eric Swalwell does the questioning.
Note the references in the transcript below to "minimization". That's the more technical term for "masking." It refers to the FISA requirement that the FBI "minimize" or "eliminate" any information picked up on a FISA that isn't pertinent to official FBI business. Flynn's name, of course, was pertinent--or so the person who prepared the tech cut thought. That person wouldn't have known that the Flynn case was totally unpredicated and, therefore, illegal.
Finally, the reason McCabe says that it's a "misnomer" to refer to a "tech cut" as an "intelligence product" is for the same reason that Priestap and Strzok didn't want Clapper sharing tech cuts with the White House--unlike formalized "intelligence products," tech cuts are more in the nature of rough working drafts and aren't intended for dissemination outside the FBI. It's an administrative thing. So:
MR. SWALWELL: One issue that we have had to clear up as well goes to the question
of the -- whether or not the conversations between Michael and Ambassador Kislyak in late December --
MR. McCabe: Yes.
-- were ever quote "unmasked" and then leaked to the public, and the then Director Comey, in testimony to the committee on March 2, 2016, went into some detail quoting from what he called quote "tech cuts" and ...
MR. BAKER: 2016, or 2017?
MR. SWALWELL: I'm sorry, his testimony was on March 2, 2017.
MR. BAKER: I think you said 2016.
MR. SWALWELL: But it related to conversations in December of 2016. He [Comey] said specifically about these tech cuts: 'We did not disseminate this take in any finished intelligence, although our people judged it was appropriate for reasons that I hope are obvious to have Mr. [Flynn's] name unmasked." And he was referring to those specific tech cuts.
"We have received testimony from other senior offcials in the Obama
administration who have said that they themselves never saw any disseminated reporting of those conversations either."
MR. McCabe: To my recollection, the best of my recollection is that the substance
or  in finished intelligence products. However, they were shared with a small number of people outside our organization.
For instance, they came up -- we found them through an effort -- without getting into too long of an explanation -- in an effort to respond to a tasking from f and so the results of what we found were communicated to the Agency, who I think had the pen on that response.
MR. BAKER: Excuse me.
[Discussion off the record]
MR. BAKER: "SMPs" are standard minimization procedures.
MR. MCCABE: I'm sorry. I should have said that. The "SMPs" are the standard minimization procedures that are defined under the FISA Act.
MR. SWALWELL: Okay, the reason I ask is specific to the investigation of this committee. There has been a prong that emerged as a result of the last parameter that is part of the agreed parameters to the investigation that focuses on possible leaks related to the Intelligence Community assessment, the ICA?
MR. MCCABE: Yes.
MR. SWALWELL: The prong that emerged was an investigation into whether or not there was quote-unquote "improper unmasking" by senior Obama administration officials, and that was premised on the leak of Mr. [Flynn's] name in press reporting, I think beginning in a report by David Ignatius in The Washington Post, and then subsequent reporting. But all of it, this unmasking investigation was premised on what we have learned since, and your testimony is consistent with this, that there was never any intelligence product.
So no transcript or summary of conversations with Kislyak that were ever masked, and therefore, there were no unmasking requests that could have been made for these nonexistent reports.
So we just want to make sure that we have for the record a clear as possible understanding of exactly what the product was that was created, how it was disseminated internally or discussed internally, and whether or not there was any unmasking linked to that report?
If you have anything else to add to that, but that was the reason for why I
was asking the specific line of questioning.
MR. MCCABE: I think your description is accurate. It's probably a misnomer to refer to it [a tech cut] as a product. It wasn't an intelligence product as we use that term. There 
I do not believe that that summary was ever masked. I'm also not familiar with any requests that we received to unmask anything. I'm not -- I'm not aware that -- if we got one, it would strike me as unnecessary if nothing was masked.
UPDATE: In addition to the speculation of Bongino and sundance, Andy McCarthy, in his most recent article, states that he no longer believes what I've just described--that Flynn was picked up by the FBI in the course of regular FISA coverage of Kislyak:
"If it were true, there would be a record of Flynn’s unmasking."
The testimony of Comey and McCabe are confirmation directly to the contrary. By stating openly that the Flynn/Kislyak information was embodied in tech cuts, they confirm the origin in a FISA. Sally Yates' Senate testimony is also of interest, because in her testimony Yates tried to explain to Senator Graham about "unmasking" or "minimization"--as discussed in the transcript above. CTH, as usual, gets the significance of Yates' testimony wrong, and unfortunately Yates also is not conversant with the these policies to offer a coherent explanation. Rather, she only understands "minimization" from a practical standpoint--"as a consumer" of intelligence reports. What she says, however, is absolutely true. Here are her exact words, minus the crosstalk with Senator Graham:
Can I try to clarify one point on this "unmasking" thing? ... As a consumer of intelligence, as an example, I would receive intelligence reports from various agencies. Oftentimes the names are already unmasked by the intelligence agency itself. ... But what I was trying to say was, oftentimes we receive intelligence reports where the name of the American citizen is already unmasked, and it's unmasked by the Intel agency because--not based on anybody's request--but because the name of that citizen is essential.
We've already seen why the name of a citizen might be considered "essential," and so be included in a tech cut. But let's go over that in even greater detail. :-(
First of all, "unmasking"--the word we hear from Senators and lawyers and pundits--is actually a term that I was never familiar with while I was working these matters. Rather, we spoke of "minimization", just as McCabe did in his testimony. If you look at any FISA order you'll see that they include page after page of boilerplate "minimization procedures," not "masking procedures." What minimization means is that, say in a tech on a telephone, entire conversations may be "minimized"--deleted--if they're not relevant to the performance of official agency duties. Or, names of USPERs in the coversation may be "minimized"--masked or redacted--if their names aren't relevant in a conversation that may be otherwise relevant. BUT, the names will be included if they are relevant. As in all government functions, there are rules in and guidelines that govern all this. It's a bit like reading an insurance policy, but it's worth it if you want to come to a real understanding of these issues.
So, to the specifics. Below are excerpts from general guidelines on minimization from DNI (pp. 9-10). These correspond to what McCabe refers in his testimony to as "SMPs"--standard minimization procedures. Check it out--I've edited it to limit it to portions that would be clearly relevant to Flynn. Again, bear in mind that James Comey isn't the guy making these decisions--the people actually preparing the tech cuts make the decisions, after being trained in minimization procedures:
Section 6 - Foreign Communications of or Concerning United States Persons
A report based on communications of or concerning a United States person may be disseminated ... to a recipient requiring the identity of such person for the performance of official duties but only if at least one of the following criteria is also met:
(2) the identity of the United States person is necessary to understand foreign intelligence information or assess its importance, e.g., the identity of a senior official in the Executive Branch;
(3) the communication of information indicates that the United States person may be:
a. an agent of a foreign power;
e. acting in collaboration with an intelligence or security service of a foreign power and the United States person has, or has had, access to classified national information or material;
After reading this, is there any doubt in your mind that Flynn's name would NOT have been minimized?
- He was an incoming senior official in the Executive Branch who had previously held other senior positions in the Executive Branch;
- he had a security clearance;
- he was under a Full Investigation by the FBI as a possible agent of a foreign power or as acting in collaboration with a foreign power's intel service.
There's no doubt in my mind that when that tech cut of Flynn's conversation with Kislyak arrived on Comey's desk or Yates' desk, Flynn's name was in it, unminimized. "Unmasking" requests are only made when the USPER name in the tech cut or other intel product has been minimized. Flynn's name was never minimized. Yates was trying to make an important point to cut through all the uninformed nonsense about "unmasking", but unfortunately she herself didn't have a handle on the whole "thing" about minimization.
So when Comey speaks of giving a "tech cut" re Flynn to Clapper, Flynn's name is unminimized. When Clapper recevied the tech cut he didn't need to "unmask" Flynn--not in that instance. Nor did anyone else with whom the tech cut was shared (contrary to Priestap's and Strzok's concerns about sharing internal docs not prepared specifically for dissemination).
McCarthy is wrong to expect unmasking in Flynn's case.
However, that's not the end of the story. We know, in fact, that while there was no unmasking with regard to the Flynn/Kislyak conversation, there was a great deal of unmasking regarding Flynn otherwise. That means that Flynn's name was being "masked" in other official intelligent products in contexts in which Obama officials really wanted to find out the identity of the person involved. A lot of those instances probably had to do with foreign communications or calls by Flynn to the United Nations (a separate issue that I won't go into here). High Obama officials in the closing days of their administration were frantically combing through intelligence reports and materials in search of derogatory information--not only on Flynn but on many other incoming Trump officials. What information was "unmasked" and who used it in illegal leaks is the jigsaw puzzle that Durham is working on--along with so much else.