Augmented Reality (AR) is the term used to describe apps that layer new information on top of what your phone’s camera lens is currently showing you. Examples include Layar, which pulls information from Google and other sources to help you identify shops, restaurants, museums etc – pretty much anything you could find in the Yellow Pages and shows it to you while you scan the area around you with your smartphone. Others like THQ’s Falcon Gunner, simply use it as an amusing way to change the gameplay, allowing TIE-fighters to swing out from behind your couch or a nearby building.

Today, a colleague drew my attention to what I think is the most amazing use of AR to-date. Quest Visual’s Word Lens is an app that will translate any text that you can squeeze into the frame of your iPhone’s camera lens and it does so in real time, and most impressively, it does it by completely replacing the text that you’re capturing with matching translated text. The effect is nothing short of stunning, taking an already pretty magical device like the iPhone and elevating it into the realm of Harry Potter-style magic.

Best of all, the app is completely self-contained. There’s no network component to the translation – it would work even if you disabled Wi-Fi and 3G.

Now here’s my confession: I haven’t actually ponied up the $4.99 fee that you need to pay once you download the free app in order to activate either the English to Spanish or Spanish to English options (yes, you pay for each one) largely because I don’t have a need for those right now, but if their demo video on YouTube is any indication of how well it works, I will be grabbing it for sure before our next Mexican vacation.

There’s not a lot of information on Quest Visual’s website other than a few FAQ’s, so here’s the YouTube…

Not too late to make this a gift for the traveler on your list.