Check out Arcade Reality for the Palm Treo camera phone. This is a brilliant use for the (IMHO) useless camera attached to cellphones.
It looks like it simply superimposes enemies in a 3D space on top of the image that your camera sees. By comparing each frame from the camera to the last frame, they are able to sense movement and adjust the 3D space accordingly. Talk about augmented reality!
I can think of a couple of ways to improve on this idea (of course). First, make it available for all phones. My T-Mobile SDA NEEDS this! Second, add GPS and social networking. Imagine playing while walking around town. A small map shows where enemies are in relation to your current position. As you hunt the enemies, other players are hunting them as well and you could bump into them on your travels. Add online updates that allow boss enemies to appear at certain locations where 2 or more players could team up to defeat it. Companies (such as Starbucks) could sponsor each boss, bringing more players into their store for the chance to play together. It would be like mixing Geocaching with LARPing, MMORPGs, and LAN Parties.
