An augmented reality application can contain various functions, be they for interaction or display. A good example of this is if you are in a museum and as you use their application, you can scan a bar code on the base of a statue and the application shows a picture of the statue with a fully interactive description. It could explain where and when it was made, who the sculpture was, and give you options to view other works by the artist. This could then be extended to show you a map of the museum highlighting different works by the artist, where they are located, and allowing you to follow the map to their locations.
Another example and the one explained in this book, is where you are at a location and you want to find different activities or venues in your proximity. This normally entails the application using the device's camera as a view and is then overlaid with icons representing items within the local area. These items can be anything from local businesses to fictitious items which just exist in cyber space. Selecting one of these items then enables interaction of varying types, the details of the premises could be displayed or a map giving you directions created.
These are just a couple of examples of the types of augmented reality applications which can be created. In reality this type of application is only limited by ideas, and the mobile device's abilities.
More information can be found on Wikipedia at http://en.wikipedia.org/wiki/Augmented_reality.