How does Reality Augmentation work?

Augmented reality is defined as a form of technology where computer generated images is superimposed onto objects as a form of enhancement. They improve or augment what is already there.
The integration of the real with the simulated blurs the boundary between the two as well as enhancing our senses. Augmented reality is nearer to the real world than virtual reality which is based upon fully immersive artificial worlds.
The video below presented by the HowStuffWorks Team explains how basic reality augmentation works. A must watch for all curious minds!