The next gen tablets should be more than capable platforms for AR projects with a high resolution camera and a plenty of juice under the hood for mangling the images and data.

It's not possible to just deduce the place and heading of the device accurately enough to apply images on the picture without analysing it, but location data could be used to gather data about items that are in the vicinity and use image recognition to spot them and draw additional layers over them.

There is great potential to augmented reality though... it would help a lot if someone managed to finally manufacture translucent head mounted displays that don't look dorky