Augmented reality has been around for a while (relatively - on a new technology timescale!), but we are yet to see great examples that actually meet business objectives.
Augmented Reality is where you have downloaded a piece of software, onto your computer, or more commonly recently, onto your mobile phone. Using the software, and the camera on your phone or computer, you can translate a special (coded) image into a 3-D object you can turn around and interact with. Weetbix had a go at this recently, putting the special images onto cards that kids could see 3-D images with, as have the Wellington Zoo and internationally both Ford and Fanta have made recent versions. The problem is, you look at the end result and think why? Why would I bother downloading the software needed just to get a 3-D car I can turn around and look at? Weetbix came under considerable fire when they did this recently, not only because they claimed they couldn't find companies like us in NZ that could do it and hired an Australian company, but also because kids simply didn't take it up.
An added complexity is that once you've downloaded the software to, say, view the Ford Ka; that same software doesn't let you also interpret the coded image to see the Zoo's 3-d giraffe. You have to download new software for each one.
Why? This graph from Read Write Web (below) helps explain where AR is in the technology invention/hype/adoption cycle:


Basically, it's early days and the early adopters are using it just to be cool. It can be a reasonable thing to do, a lot of brands rely on people thinking they are cool. Trouble is, if it takes a lot of effort (downloading special software for example) for little reward (wo-hoo I can see an image in 3-D) then I think the "cool" factor heads right out the door and in comes the "WTF?" factor. Worse still, the technology is what gets the bad rap - people think it's Augmented Reality that is a waste of time. 
I disagree. Technology for technology's sake is a waste of time.
There is no way I would recommend employing technology in any situation if it isn't helping/entertaining/educating/moving the audience first, and then it has a chance of being able to meet business objectives.
Augmented Reality simply hasn't been used much yet to the benefit of the audience using it. When it does, it will have moved further along that graph, and start being a valuable tool for certain people and tasks. (I have to acknowledge that Fanta's tennis game and this marble game are fun examples that do start moving AR along that continuum.)
We are working on such an example at the moment - if you know of any please let me know - I'd love to hear of real success stories.