WordLens is an obvious next step in Augmented Reality and Machine Translation. It translates between English and Spanish (though obviously other languages could follow) by pointing your phone camera at written text and it overlays the translation in place, as if the world were changing to match your native language. And it does so without a network connection. It might not be perfect yet, but it's a great idea and improvements are sure to follow.
Mokalus of Borg
PS - My nightmare scenario for AR is an app that removes clothing from strangers.
PPS - But I suspect that could be beaten with anti-image-recognition fashion.