Augmented reality and Virtual reality are the next leaps in immersive tech, and they’re set to pull us even deeper into our screens. Although both are still in their infancy, they are generating a lot of buzz, with companies racing to invest millions in research and development.
Still, there’s a lot of confusion around what each of these technologies does, especially now that MR (mixed reality), a partly marketing-driven term, is entering the conversation. And then there’s extended reality (XR), a catch-all term for anything that blends the real world with digital elements.
Let’s unpack what all of this means and why it matters.
Table of Contents:
What is the difference between Augmented Reality and Virtual Reality?
Let’s start with the basics. Augmented reality adds to the world around you. Virtual reality replaces it entirely. However, they serve very different purposes and create fundamentally different user experiences. The best way to understand these technologies is to break them down one by one.
What is Augmented Reality (AR)
Augmented reality is when you look at the real world, but it’s augmented with additional information or graphics in your view. The key to this AR concept is that the virtual elements are spatially anchored to real-world coordinates. That means they occupy a relevant place in your view, as opposed to moving around with your gaze when you turn your head.
In many cases, you can even interact with the visuals, augmenting your view. You can experience AR through a smartphone and one of the many AR apps available, or for higher performance, you can use dedicated AR glasses. Take Google Glass, once the poster child of futuristic eyewear. It displayed data in your view, sure, but nothing was spatially anchored. It floated. It followed your gaze. Technically impressive, but not true AR. More of a connected head-up display.
What is Virtual Reality (VR)
Virtual reality is different. It’s when the world you’re standing in is completely replaced with a virtual one. With VR, everything you see and everything you hear is computer-generated. The virtual world it takes you to can be incredibly realistic, or wildly synthetic and fantastical.
VR surrounds you in 360 degrees. The space is fully three-dimensional, and in more advanced systems, you can move through these spaces and use your hands to interact with objects inside them.
You can start with something as simple as slipping your phone into a cardboard head mount or a slightly upgraded plastic holder. But most of the attention today is focused on high-end, head-mounted displays. Devices like the Meta Quest offer rich, fully immersive virtual environments where you can explore, play, and interact without being tied to a computer. These are true VR experiences, built to transport you completely out of your surroundings.
Augmented Reality vs Virtual Reality: What’s the Difference Between the Two?
| Aspect | Augmented Reality (AR) | Virtual Reality (VR) |
| What it does | Adds digital content into your physical surroundings | Replaces your real surroundings with a fully digital environment |
| Sense of presence | You stay aware of the real world while viewing digital overlays | You are completely immersed in a virtual space, disconnected from the physical world |
| Device type | Smartphones, tablets, smart glasses like HoloLens or Magic Leap | Head-mounted displays like Meta Quest 3, PlayStation VR, and Valve Index |
| Set up and usage | Quick to launch, usable on the move | Requires space, setup time, and uninterrupted focus |
| Immersion level | Partial—digital elements blend with your real view | Fully immersive, everything you see and hear is computer-generated |
| Physical mobility | High—you can move naturally in your real environment | Movement is limited to a defined virtual space, often constrained |
| Everyday usefulness | Practical for shopping previews, live directions, maintenance, or real-time help | Ideal for gaming, simulations, remote training, or immersive storytelling |
| Comfort and fatigue | Less likely to cause strain, since real-world orientation stays intact | Can lead to eye strain, motion sickness, or discomfort during extended use |
| Social interaction | Keeps you connected to people around you | Removes you from a physical social context |
| Public perception | Seen as useful but still waiting for mainstream breakthroughs | Often viewed as impressive but limited to gamers and tech enthusiasts |
| Productivity potential | Useful in real-world workflows like design, retail, healthcare, or navigation | Virtual desktops, multitasking setups, immersive brainstorming, or collaboration tools |
| Examples | Pokémon Go, Google Lens, IKEA Place, Snapchat Spectacles | Meta Quest 3, Beat Saber, Half Life Alyx, Google Earth VR |
| Current limitations | Hardware is expensive and limited in field of view, lacking widespread use cases | Headsets are bulky, sessions can be tiring, and are not always easy to justify for daily use |
| Where is it heading | Moving toward spatial computing and mixed reality integrations | Becoming lighter, more self-contained, and suited for work and play beyond gaming |
What is Mixed Reality (MR)
Mixed reality sits somewhere in between. It embeds digital components into your physical surroundings, but unlike basic augmented reality, those elements respond to your space. You are not just seeing a floating window or graphic. You are walking around it, interacting with it, and sometimes even forgetting it is not there. The real world stays visible, but the virtual additions behave like they belong inside it.
Apple Vision is the most talked-about example right now. It lets you open multiple virtual screens in your living room, watch a movie in a theatre-size space, or place objects on your coffee table that stay locked in place as you move. You are still grounded in your environment, but the digital content adapts to it in real time.
Mixed reality is underhyped right now, often overlooked next to the buzz around virtual reality headsets and the simplicity of AR apps. But quietly, it is carving out its own space. Not as a gimmick or a middle ground, but as a different way of interacting with information. A way that feels more natural, more layered, and less intrusive.
What’s the Future of XR (Extended Reality)?
Extended reality goes one level broader. It is the umbrella term that includes augmented reality, virtual reality, and mixed reality. XR is not a device or a feature. It is the spectrum we are building toward, one that perhaps blends presence, context, and immersion across every screen we look through. You might hear XR in enterprise or hardware circles where companies are working on full-stack immersive solutions.
Applications of Augmented Reality
Augmented reality is a technology that lets digital content live inside the real world. It adds visuals, data, or objects to your surroundings in real time, making a mix of real and virtual reality. We have seen that AR is not just for games or filters. People are already using it in many fields to solve problems, make things better, and find new ways to do things.
Here are a few of the sectors where augmented reality is starting to be functional.
1. Restaurants and Hospitality
Augmented reality is helping businesses in the hospitality industry come up with new ways to showcase food, induce a sense of storytelling, and connect with guests. AR is helping restaurant owners make a regular meal more personal and memorable, from interactive menus to immersive brand moments; ideas are limitless.
Take Bareburger, for instance. Ordering there is not just about scanning a QR code to view the menu. It is about seeing your burger in full 3D before it even reaches the table. You can rotate it, check the toppings, and get a feel for the portion. Some restaurants are even layering in real-time nutritional information, letting customers scan a dish and instantly view calories, allergens, or sourcing details. It adds transparency, helps with building trust, and gives diners more control over what they choose to eat.
2. How Is AR Used in Retail and E-commerce?
Augmented reality is changing the way we shop and browse. It’s no longer just about polishing up a product page. It’s about letting customers see, try, and pick with more confidence without having to go to a store. AR makes shopping more personal and visual, whether you’re putting a chair in your room or trying on a watch.
For example, look at Lenskart. With their AR try-on feature, people can scan their faces and try on frames in real time. You can turn your head, check the fit from different angles, and see how a style looks on you, not just on a conventionally sized model. For buyers who usually rely on guesswork, this turns a routine purchase into something more intuitive. It reduces returns, builds trust, and brings the trial room to your screen.
3. Tourism and Culture
In the world of tourism and culture, augmented reality is starting to feel like a time machine. Instead of reading facts or looking at still displays, you can point your phone at a place or object and watch something unfold. A painting may enter your room, or a fish may swim through an ocean mural. History becomes something you experience rather than merely learn about because it is layered with narrative.
A great example of an AR portal experience can be seen in this demo by ARLOOPA.
A Virtual Door to Vincent van Gogh’s Bedroom in Arles
4. Architecture, Construction, and Design
In architecture and construction, augmented reality is being used to turn CAD drawings into walkable, real-scale models. Imagine standing on a site and opening your tablet to see proposed walls and rooms overlaying the ground in front of you. That’s AR in action.
One standout is Magicplan, an app used widely in India and beyond. With your phone camera, it scans a space, builds a 3D floor plan, and lets professionals or homeowners walk through a visual model. Sketches become virtual walkthroughs that clients can experience.
Morpholio’s ARki is another favorite. Designers drop their plans into the app and can walk around growing walls and spaces in real time. It turns abstract ideas into intuitive, spatial experiences, before a single brick is laid.
5. Medicine and Healthcare
In medicine, augmented reality is being used to guide surgeries, train doctors, and improve how patients understand their treatment. It adds a digital layer to the real operating room, helping surgeons see what is beneath the surface without having to cut it open first.
One story stands out. Dr Vipul Patel, a Florida-based surgeon, performed a complex prostate cancer surgery on a patient in Africa. He used a robotic system paired with real-time visuals to guide the procedure from thousands of miles away. The AR interface gave him a live, layered view of the patient’s anatomy while he worked. The surgery was successful. The cancer was removed. And the patient never had to leave home.
Applications of Virtual Reality
Virtual reality goes far beyond gaming or headsets. It is about stepping into a space that does not exist, and still feeling like you are there. That makes it perfect for things that are risky, expensive, or impossible to recreate in the real world. Unlike AR, which adds digital layers to your surroundings, VR drops you into completely immersive spaces where everything you see and hear is virtual. And that unlocks possibilities across various industries, from hospitals, education, to construction sites, and therapy rooms.
Here are a few places where virtual reality is already making an impact.
1. Gaming: VR’s First Big Moment
If you asked a decade ago what virtual reality would change first, most experts would have said gaming. Turns out, they were right, although the breakthrough took longer than expected. Gaming remains VR’s strongest use case because it leverages what the technology does best: create movement, presence, and emotional intensity in a space that doesn’t exist. Traditional games keep your body still. VR asks you to move, duck, dodge, and swing, turning your actions into part of the gameplay.
A Belfast startup called Incisiv made that idea real with a game called Dodgecraft. You duck asteroids, sidestep sprinting robots, and use real physical motion to play. After five minutes, players are breathing hard. It is gameplay, yes, but it is also exercise disguised as fun.
2. Virtual Reality in Fitness and Exercise
Virtual reality is changing the way people work out. It is not about numbers on a screen or pushing through reps in silence. It is about stepping into a space that pulls you in and makes you want to move. You are not just exercising. You are doing something that feels like a game.
Take Supernatural or FitXR. You are not in your living room anymore. You are hitting targets in the middle of a desert or reaching for the sky on top of a mountain. The music is loud, the visuals are sharp, and your body just follows. You lose track of time. By the time it ends, you’re breathing heavy and only then realise how hard you were going. It is fitness, just reimagined.
Credits: FitXR
3. Therapy and Mental Health
Virtual reality is being used to treat anxiety, phobias, and trauma by helping people face difficult situations in a safe and controlled way. Someone afraid of flying can practice boarding a plane. Someone with social anxiety can rehearse talking to a crowd. These aren’t just simulations. They’re exposure therapy, designed to ease the mind into real change.
VR also helps with PTSD, chronic pain, and stress management. It offers a private, low-pressure space where people can build confidence at their own pace. For many, it feels less overwhelming than walking into a therapist’s office.
4. Virtual Tourism and Museums
Virtual reality is giving museums a new way to bring people in. You do not need to book a flight or stand in line. Just put on a headset and walk through spaces that would otherwise be out of reach. For people with disabilities or living halfway across the world, this changes everything.
At the National Museum of Natural History in Paris, visitors enter the Cabinet of Virtual Reality and go on a journey through evolution. With a headset on, they explore species up close, trace their connections, and see how life unfolded across time. It is not just immersive for the sake of it. It makes complex ideas feel immediate, visual, and real.
Journey into the heart of Evolution – trailer
5. Entertainment and Film
Virtual reality is quietly redefining storytelling in entertainment. It is giving creators a way to step inside a story rather than just watch it. The move is no longer about throwing flat films into VR; it is about building narratives made for immersion.
James Cameron, the filmmaker behind Avatar, famously said that VR felt like a yawn because existing content was just flat scenes on a headset. But when he experienced something properly built for VR, everything changed:
“A door opened for me, and this is how people can see the movie the way I created it to be seen.”
That shift is why studios like Disney and tech conglomerates like Apple and Meta are betting big on VR-first content. This is not a gimmick. It is a new kind of cinema where you are not just watching. You are part of it.
Advantages and Disadvantages of AR and VR
| Technology | Advantages | Limitations |
| Augmented Reality (AR) | Adds relevant digital content on top of your physical surroundings. Directions, data labels, and product previews feel context-aware instead of random overlays.Let’s you stay in the surroundings. You are not shut out from the real world, which makes it safer and more social.Easy to access. Works on your phone, tablet, or glasses. No need for high-end setups to try it out. | Most AR experiences today feel like novelties. Real utility still needs to catch up.Hardware is still clunky. The field of view is narrow, and tracking isn’t always smooth.Some users feel uneasy with the constant camera use (Ray Ban Meta) hinders the privacy of the public. |
| Virtual Reality (VR) | Fully immersive. When done well, it pulls you into worlds you can walk through, touch, and explore.Ideal for training, therapy, and storytelling. It simulates environments that would be costly or risky in real life.Creates emotional impact. A VR film or experience can hit deeper than a screen ever could. | Not everyone enjoys being cut off from their surroundings. Fatigue and motion sickness are real.Needs space, setup, and sometimes cables. Not exactly plug and play for most users.Despite all the potential, it’s still niche. The barrier to entry is too high for casual users. |
Market Size and the Road Ahead
Both augmented reality and virtual reality are still in their early days, but the market is growing fast. The combined market was estimated to be worth about $22 billion in 2024. It is expected to surpass 96 billion by 2029. By the early 2030s, virtual reality is expected to reach well over 120 billion, while augmented reality alone could reach 36 billion.
Even though headset sales are expected to dip in 2025, the market is far from cooling off. Smart glasses, mixed reality gear, and more intuitive content are all fueling the next wave. As prices drop and devices become less bulky, adoption will grow, well beyond gamers and early adopters.
The biggest tech players are already placing their bets. Apple, Google, Samsung, and Meta are not waiting around. And when that kind of money moves in, it is rarely for a short-term gimmick. It is because the medium itself is evolving, with real potential across industries, from healthcare to education to the spaces where we play and work.
Right now, we are somewhere between the hype and the habit. But the trajectory is moving up.
The Line Between Real and Virtual Is Only Getting Thinner
Augmented reality and virtual reality are already changing how we experience content, spaces, and even emotions. We have seen them reshape everything from shopping and fitness to medicine and museums. What started as experimental tech is now quietly becoming part of daily life.
The devices are still evolving, the content is still catching up, and mass adoption will take time. But the shift has begun. AR keeps adding context to our world. VR offers a full-on escape. And in the middle, new formats are emerging that come across as more genuine and more human.
This isn’t just about future gadgets. It’s about how we’ll see, feel, and move through the world next.
Interested in working with AR or VR?
You’ll need more than just technical skills. You’ll need a clear understanding of how products are imagined, designed, and brought to life. If that’s where you’re headed, explore our Product Design and Management course. It’s taught by IIM faculty and industry professionals and covers everything from research and CAD to prototyping, design thinking, and market fit. A solid next step if you’re looking to turn immersive tech into something real and useful.
FAQs – Augmented Reality Vs Virtual Reality
1. What is augmented reality, and what does it actually mean?
Augmented reality is a way to add digital layers to the real world, such as text, 3D models, or graphics that feel anchored to your surroundings. It blends virtual content into your view of the real world, bringing context and utility instead of replacing it.
2. What is the difference between augmented reality and virtual reality?
AR enhances your real environment by overlaying digital content, while VR creates an entirely virtual world and blocks out your surroundings. In simple terms, AR adds to reality. VR replaces it.
3. When should I use AR vs VR in real life?
Use AR when you want context, guidance, or a practical overlay that keeps you present, like navigation, product previews, or real-time data. Use VR when you need full immersion for training, storytelling, therapy, or gaming that demands presence.
4. What are the advantages and disadvantages of AR and VR?
AR works on phones, keeps you aware of your space, and adds useful overlays. But apps often feel gimmicky, hardware is bulky, and tracking can be inconsistent. VR delivers emotional impact and total immersion, perfect for deep experiences. But headsets are heavy, expensive, can cause motion sickness, and detach you from the physical world.
5. Are AR and VR still niche, or are they growing?
They are growing fast. The AR and VR market is expected to reach tens of billions in the next few years. Big tech companies and sectors like healthcare, retail, and entertainment are investing heavily. This is more than hype. These are habits changing fast.