There is still lots of hype and words sloshing around augmented reality, but I have yet to see one person actually using it. And bear in mind that I live in a city that is full of tourists all year.
For this reason I think the classic notion of holding up your phone and watching an annotated version of the street scene in front of you through its screen will never become anything other than an amusing toy. The use case is just too difficult and uncomfortable, and in some places too dangerous.
But that doesn't make the whole idea of augmented reality doesn't work, and I'm not thinking of waiting until corneal implants remove the need for looking through a phone camera. Audio guides have been with us for a long time, and a location-sensitive platform like a phone have the potential to work well in this context. We already have Google Maps walking directions on Android with its disembodied voice telling you which way to turn from your pocket. I can see lots of professional and consumer applications using voice alerts.
It will be interesting to see if 2011 will bring some more practical applications of augmented reality or if we are still in the hype phase.