Augmented reality is a term for a live direct or indirect view of a physical real world environment whose elements are merged with or augmented by virtual computer generated imagery creating a mixed reality. Source: Wikipedia.
Basically for the iPhone and Google Android devices when you look at the camera view in these apps it overlays points of interest or other information on the screen in the direction you are pointing the camera.
Point the phone down the street and it may tell you how far the next pub is and give you a visual of what it looks like, as well as other pubs in that direction giving distances and contact information.
Other apps will tell you, when you point the camera at say a bank, the services provided and where exactly they are in the bank. When you click on icons overlaid on the camera's view you can source related information.
These applications take advantage of the phones' GPS and compass features and access to wireless networks to mash up local Web content with the world that surrounds you.
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