Augmented Reality, or just AR, is a combination of graphics overlaid onto the real world. Think of it as a cross between Virtual Reality (VR) and Real Reality (RR). Some good examples are Esquire's AR issue, eLearning video & GE's AR.
AR is still in early phases of development, but as we see more and more smart phone coming out we are beginning to see some interesting uses of AR on the Phone. For example, Stella Bar finder, Wikitude AR Travel Guide & a Helicopter Game.
As you can see from the examples above there is a lot going on. Although some of these are cool application I think we will start to see, in the next 2-10 years, a total shift to AR in our daily lives. Just like the cell phone, internet & email, everything will start to incorporate AR, from car windshield directions, zombie AR games to AR repair.
Welcome to the Augmented Matrix!