Total Immersion, which wowed the Demo crowd two years ago, has technology that lets you merge computer-generated objects into live video. At Demo 07, the company showed off how a small PC with a camera could add a little dancing cartoon character to a live video of a newspaper. In other words: the newspaper was flat, but the live video of it on the PC's screen had real-time characters dancing around on it. And when the camera moved, they moved, so they almost appeared to be connected to the paper.
This technology will be great for navigation apps, and for games.