What's all this about "augmented reality" for mobile apps? Well, Virtual Reality (VR) has to do with being immersed in a synthetic 3D graphics environment, i.e., experienced in a head-mounted display -- whether for action games, or for serious research like exploring the virtual surface of Mars or experiencing chemical bonds at molecular scales.
Then Augmented Reality (AR) combines graphics overlays on top of (i.e., augmenting) the real world, as in a heads-up display or the familiar yellow first down line for football games.
On a smartphone, the device already can display location-based information about near-by businesses and points of interest. And it has a camera that can display live video on the display. So combine these and you get AR -- hold up the phone and look around to see the local scene as live video, with text and graphics overlays identifying items in that direction.
This idea is already implemented in mobile apps including Google Goggles (for Android) and Yelp (iPhone 3GS only).
Or try Wikitude (shown here), which adds geo-tagged user-created content including Flickr photos, YouTube videos, and Wikipedia info (iPhone, Android, Symbian), and Layar, which imports user-created or partner content "layers" for customized tours of local areas (iPhone, Android).
However, these apps still are limited by the handheld mobile platform. It's awkward to hold up a device and look around with it, especially when the small screen can only show a rather limited field of view within the surrounding scene. In addition, the inexpensive sensors in handheld devices can have significant errors. As a result, current mobile AR apps cannot precisely register information to the background scene, and instead typically indicate objects of interest in a general direction, and show their relative positioning.
So augmented reality is just beginning on smartphones. Still, these devices are good enough to do real-time GPS navigation, for example, and support AR-style apps that display information about upcoming traffic cameras, or help you retrace your route to where you parked your car.
Maybe it's time to put on wireless eyewear to go with our Bluetooth headsets.
See my full article - Augmented Reality Goes Mobile - for more on the development of mobile AR, from early research prototypes to desktop AR to mobile devices
See my Smartphone Apps Gallery for more on apps and app stores.