Mattel is releasing toys using Augmented Reality (AR).
Have a look at the video on the news site. They use web cam software to augment what the toy looks like to the user. It's a bit crappy on a small laptop screen, but I'm sure would be really cool on a super wide screen TV. Look out for consoles to implement this in the next generation. This doesn't just have to be for kids toys. Think of the possibilities. It gets even better when you move the screen to goggles with a built in webcam.