Augmented Reality (AR) refers to a view of the real world that is "augmented" by a computer program, such as a view of the night sky that provides information about the stars and planets. The augmentation usually takes the form of information, either directly through text on the screen or indirectly through graphical representation.
Have you seen the yellow first down marker during televised football games? That is an example of augmented reality. As the announcers are always quick to point out, the line is not real, and it can't be used as an exact measurement, but it does provide great use for the viewer, who otherwise not be able to see the first down marker.
Augmented Reality combines a camera's view with other information, and it can even be used in gaming. However, this is not always the case. Sixth Sense is a wearable gestural interface developed by Pranav Mistry at the MIT Media Lab and uses a projector to project computer-generated information into the real world. (Check out the cool video.)