When Neo is detained by the Agents, they place a tracking device inside of him. Do they insert a physical device into his actual body, or did they install a virtual tracking device into his matrix program? Bugging the pod body makes more sense than trying to use a computer bug that Morpheus and his hackers could see, isolate and remove from the Matrix.
In The Matrix there is no such distinction. Every (virtual) program manifests itself as a physical device in the simulated reality that is the Matrix.
Some examples from the top of my head
- For instance the tracking device used by the free people (red/blue pills) are actual pills.
- The emotion that the Oracle implants in Neo manifests itself as Cookie.
And the tracking device used by the Agents is no difference, it appears as physical "bug".
Now, in case you are referring to the biological body that is sitting in the pods in the real world, that is very unlikely, for two reasons.
They are trying to track him inside the Matrix, but you could argue that by now they might have figured out that the free humans like to free other humans. But if you think about the scene where the Nebuchadnezzar has to hide from the sentinels, this rules out a physical tracking device: If they had implanted a physical device the sentinels would have had no trouble finding the Nebuchadnezzar, even with all its systems powered down and Morpheus wearing a hat.