"In some cases the 3D computer graphics can be almost indistinguishable from real objects,'' said the 45-year old AR expert.
The technology, first thought possible in the 1960s, has grown from a million-dollar global market four years ago, to a billion dollar giant destined to continue to grow with the success of smartphones kitted out with internet, compasses, and GPS.
Prof Billinghurst, who will receive the prestigious Institute of Electrical and Electronics Engineers Virtual Reality Technical Achievement award on March 19 in recognition of his work, says the technology has "almost unlimited potential''.
Internet behemoth Google has developed a pair of $1500 glasses that look like normal spectacles, which has a display over one eye which provides constant additional information to what is being seen in real life.
Canterbury University's HIT Lab (Human Interface Technology Laboratory), where Prof Billinghurst is a director, are also working on personal navigation applications which can guide users directly to their location.
"People often use their mobile phones and Google maps to navigate themselves to a new location,'' he said.
"But some people have a difficult time reading maps, or the maps may get your near where a shop is, but not right to the door."
"So, augmented reality apps can put virtual tags in the real world. For example, if I want to try and find a coffee shop, all I need to do is hold my phone up and arrows will appear in the real world and guide me right to the location.''
It could also be used for house hunters.
"If you're looking for a house in an area, you can drive by houses, point your mobile phone at them and see augmented reality tags that tell you the price the house last sold at,'' he said.
The technology is now so advanced that it's being used in operating theatres, with surgeons able to layer a CT scan or x-ray over a patient to carry out intricate procedures.
The Christchurch researchers are trying to see how apps can be controlled by speech commands, as well as how natural human gestures can interact with virtual content.
Prof Billinghurst gave the example of an engineer designing a car part.
"If they could see a 3D model of the car part floating in front of them, it would be really natural for them to be able to reach out with their hands and start manipulating that part.''
Gaming is another potentially massive area, he said, by bringing the games into the real world.
"You can have a real world treasure hunt where you've got to go to real locations where people have to get off the couch to find objects, or power.''
They've already created apps that bring comic books to life .
HIT Lab receives funding from the Government, which is excited by the commercial prospects of its locally-based spin-off companies.
They've also received grant funding from Goggle, Nokia, ABB, for a variety of different AR applications, which once developed are quickly available for free downloads.
"I never expected my research would impact on the lives of millions of people,'' said Prof Billinghurst.
