Virtual Reality is a piece of hardware you put on your head which shows you a completely 3D rendered space in which you can move around in and interact with. It feels like you are somewhere else and is quite impressive when you enter into a new fantasy world that doesn't exist in reality. Sometimes, however, you can feel disconnected with that world because the hand controls are not responsive and you are blocked by an unseen force that will not allow you to go into certain areas. As the technology grows the immersiveness will only get better.
Augmented reality is another piece of hardware which you wear on your head but you can still see the world around you, like the inside of your house, office, backyard, or wherever, but in those spaces it can project images that appear like they are right in front of you and you can interact with. Let's say you wanted to see what different types of furniture would look like in your house without having to go out and buy them, or a different paint color on your walls without painting.
It has other interesting applications as well, such as simply having a conversation with your friends or loved ones, and they would appear as if they were standing there in front of you. If you needed ideas for your job or collaborate with colleagues from around the world you could easily do this as well. It also can be directly linked to your cell phone and the two pieces of technology can interact with each other seamlessly.
I think this is going to be a huge success in the future with endless possibilities. I have provided a link with a short video that you can watch here: Augmented Reality
Scott Goerz