With quite a few Augmented Reality iPhone apps currently in development, along with creative new approaches such as this use of HTML 5 video, I see Augmented Reality as a frontier with a great deal of space for startups to flourish.
1) Sci-Fi AR is much, much closer than people think. Obviously iPhone/Androids apps are a good first step, but Minority Report style UI's within 2 years wouldn't surprise me.
2) AR is going to be HUGE. I think there is a distinct possibility that AR could be bigger than the web. It feels odd saying that.
The one thing holding it back is the lack of the AR equivalent of HTML/HTTP. At the moment everything is proprietary. Hopefully, HTML5+Extensions (eg http://www.w3.org/2009/05/DeviceAPICharter) will get there soon.
