if this were anywhere but the iphone ecosystem where ifart is/was all the rage, seb lee-delisle (papervision 3d team, http://www.sebleedelisle.com/) would be absolutely right: "augmented reality has no practical use. but it IS fun."
The form factor is wrong. The iPhone form factor is a good communications device that can offer a web/search/computing interface in a pinch. It's not comfortable to use in a lot of situations, and its interface soaks up all of your concentration.
What's needed is an interface that can convey information but which is not a soak for all of your attention. A 5x8" form factor which is extremely lightweight and daylight readable could be held like a cue-card. Add accelerometer, compass, camera, good contextual voice recognition, and GUI which is easily operated by one thumb, and you have it.
Heads-up displays on your contacts, or direct neural inputs would be dandy. I think we'll get the above before that, though.
I'd like to see an iPhone hooked up to a model plane/helicopter. Now that it's got a compass in addition to the GPS and acceleromter, it's a potential autopilot with video capability. Poor man's UAV/cruise missile perhaps?
This starts to remind me of the 6th Sense project demoed at TED - http://www.ted.com/talks/pattie_maes_demos_the_sixth_sense.h.... We have so much information available that would be a lot more useful if it is intuitively and seamlessly available WHEN its most useful.
And not everyone has, so this is still an interesting discussion to be having. I find the fact that hardware is catching up to imagination (finally) to be noteworthy and worth talking about.
That's fair enough. I guess every good idea has been had once before. Personally I'm just looking forward to having everybody's bio floating over their head when I look at them through my iphone camera. Wait. No. No, I'm not. Scary times we live in.
That's a video of what Augmented Reality can do on the G1... definitely cool app.