Augmented Reality (AR) is the combination of the real world with the virtual world. You can think about AR in the future like glasses or lenses we wear and which combines the physical world in which we are with things a computer adds (virtually) in this world. We wrote already about AR. See for example the posts NOKIA MARA, Metamersion. I think AR has a golden future and it won't be too long before consumers can taste the unlimited possibilities of AR. The first AR game is already there. Attach of the Killervirus is a game which allows you to fight against the most deadly virus with your mobile phone. Do you see a bright future for AR? To get a better view on the possibilities of AR just watch the YouTube clip (sorry, it's from 2004 ).
Some interesting links to additional information about Augmented Reality:
Film Augmented Reality (80 mb)Selectie van Augmented Reality sitesHowstufworks