Virtual Reality has been a mainstay of sci-fi for decades but 2010 could see a pared-down version become mainstream.
Augmented reality (AR) has had a quiet launch on mobile handsets but it set to explode next year, experts say.
AR is a technology that allows data from the web to be overlaid on a view of the physical world.
Although a relatively small sector at the moment, analyst firm Juniper Research predicts that AR will generate incomes of $732m (£653m) by 2014.
AR allows mobile operators to combine the increasing functionality of smartphones, such as GPS, video and accelerometers, with the increasingly available number of location-based apps.
Already mobile phones use location technology to help people find their way around, such as an iPhone app developed by UK firm Acrossair to help people find their nearest tube station.
US location-based social network Brightkite allows users to find friends in their vicinity simply by turning on the camera on their mobile phone and pointing it around them.
If any of their friends are in the same location, they can see their posts and photos.
Futurologist Ian Pearson predicts an explosion of such services next year.
"I'm surprised we haven't got there yet. But it makes a lot of sense if a friend is a street away then you can meet up for coffee," he said.
And it won't end there as the physical and virtual worlds increasingly blur, he says.
"Instead of seeing people as they are you might well be able to see their Facebook profiles appearing as bubbles above them," said Mr Pearson.
This is likely to raise some very important privacy issues but Mr Pearson thinks users will be in control of what others see.
"It will be up to individuals to set the privacy levels," he said.
Next year will see a range of "experimental" services rolled out as mobile firms grapple with how to make money from AR, thinks Martin Garner of analyst firm CCS Insight.
"It is an exciting area for mobile. It is a way for them to define a new area of the internet because phones can do it in a way that the desktop can't," he said.
The most obvious way to turn AR into a money-spinner would be via advertising, thinks Mr Garner.
In the US, Brightkite has partnered with US electronics retailer BestBuy to run augmented reality advertisements during December.
The service, available on both the iPhone and Android-based handsets, highlights BestBuy stores to anyone nearby.
Local information service Yelp has a tool called Monocle which allows users to hold up their phones and locate nearby coffee shops while search firm Thundre offers an AR product finder, showing users where to find a particular item in any given location.
"This ability to find out what a store is selling without having to actually set foot inside the store is brilliant, especially if you want to avoid going in and out of every single shop in town to find the item you're looking for," said Paula Abrahamson, chief executive of Thundre.
As applications like these become mainstream, consumers will be bombarded by stores telling them about their products and services, predict experts.
But Mr Pearson thinks it could also give power to consumers.
"If you are in M&S looking at a rack of dresses you would be able to see the equivalent rack of dresses in other shops," he said.
"Or in a store where the assistants are useless it could provide a video demonstrating how a particular product works or allowing you to call up all the specs," he said.
Google is unsurprisingly keen to jump on the AR bandwagon and in December launched Google Goggles, an application for Android mobile phones that allow people to search for more information about a famous landmark or work of art by taking a photo of that object.
Real goggles could be the next step for AR, thinks Mr Pearson.
"They won't be cumbersome things like virtual reality headsets. It could simply be a pair of glasses with lasers built in. I'd be surprised if they are more than a year or two away from market," he said.
The blending between the physical world and digital interfaces is already far advanced at the Massachusetts Institute of Technology.
Its SixthSense project is working on incorporating computer information into the real world, by developing a wearable gesture-driven computing platform that can provide digital information in any part of the physical world.
Browsers too are looking to blend data with the real world.
The Aurora concept browser is the brainchild of Mozilla, the firm behind the Firefox browser and was dreamed up in 2008.
It is intended to be a glimpse of how we may interact with our PCs in the near future.
It envisages a world where interaction with data becomes indistinguishable from how we interact with objects in the physical world, pulling, pushing, dropping and lifting content onto machines.
While the future looks rosy for AR it has not entirely been a smooth path for its development.
In December Dutch firm Layar, which runs some of the most popular AR apps, withdrew its browser from the iPhone apps store due to constant crashes.
And some in the business dismiss the current tranche of services as mere gimmicks.
Blake Callens, a AR software engineer at interactive marketing agency Zugara, is a fierce critic.
"At least once a week, I see someone else pimping their new, 'totally awesome' AR app that's nothing more than a 3D model dancing around. For people, like me, who develop AR, they are old news, or even worse, a joke," he wrote in his blog.
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