Ok, so I've seen demos of augmented reality for as long as I can remember (at least since the early 90's). As computers get more powerful it eventually trickles down. Apple has stated the next iphone update in september is going to open up the floodgates for augmented apps. Logitech has had an effects plugin for 3 years now that allows you to add objects (glasses, masks) over your webcam video
even have an animated avatar, even some female ones
Now the problem with logitech is that the tracking isn't that great, so your avatar usually ends up looking like a puppet with a sprained hand, and it's not very realistic. Also, logitech refuses to make this open source so users can make their own, nor will they bother adding new ones.
I just saw this demo, which does show some promise. It's as if they are doing realtime hollywood effects:
What's the point of all this? Well, it would seem to me if augmented reality ever starts getting good (and lord knows flat screen TV's keep getting bigger and cheaper), one day we'll have what appears a full length mirror which is in fact a display that is projecting an image of a female looking back in realtime. Imagine skipping all the work of getting dressed up, fullfilling your fantasy at the click of a button? I for one would love such a system!