So, I found out that the new Playstation Vita has a handful of games that are using Augmented Reality. When I saw this, the first thing that came to mind was Shadowrun.
It's not too intricate, but a nice little advancement in gaming technology. Basically a set of cards you set on a table, and through the game's camera you transform that space into your game's setting. The videos I have seen so far show little tanks maneuvering around coffee mugs, a miniature racetrack, and a tiny soccer field.
I guess when I am trying to explain AR to a player who doesn't know the concept, I'll just pull up the demonstration videos.