Augmented reality

What I know about this topic: I know nothing about it.
Questions I have: What is it? and how does it work?
Useful links:
http://www.howstuffworks.com/augmented-reality.htm
http://www.technologyreview.com/review/428212/you-will-want-google-goggles/
What I learn:

1. Augmented reality is a type of technology that integrates the real world with computer generated environments. Such devices or programs already exist like the Google glasses or the iPhone apps.
2. This type of technology can be used in the army for the soldiers to identify weapons or place marks on  people or objects to identify danger. 
3. It can also be used in commerce for the buyer to see more information about the product also they can be able to see the product without opening it.
4.  Also for architecture results for the project can be seen, how it would look like without the structure being physical.
5. Not only can you see it in the computer screen but you can also see it in real life with projectors that bring he information to life.

Well I actually had like this a lot, you can see it in many movies like in the iron man suit or in the star wars conferences between Jedis. I have an app in my phone that scans products and tells me the price but i am anxious of getting more of this technology. 

Question I still have:

Due to lack of time I couldn't figure out how it worked. So How does this work?