mixed reality
n. An environment that combines elements of both virtual reality and the real world.
Examples
2001
In a conceptual leap that goes even beyond the idea of virtual worlds, the Human Interface Technology Laboratory of the University of Washington will be showing Technology in Bloom. This is an example of augmented reality. The viewer wears goggles that superimpose virtual images onto the real world. So you can see the actual room you are in, decorated with, say, a fetching 3-D virtual shrub (and you don't even have to water it). … Another mixed reality work on display will be New York artist Camille Utterback's Text Rain, where viewers catch falling virtual letters that appear in a mirror image of themselves.
—Denise Taylor, “Make an exhibit of yourself,” The Boston Globe, April 12, 2001
1994 (earliest)
Military simulation developers who've put grabbed real world images to use are among the most likely to find commercial possibilities in 'mixed reality' entertainment.
—Francis Hamit, “From image-exploiting military simulation to live entertainment,” Advanced Imaging, November 01, 1994
Notes
One of the surprising things about technology is its consistent ability to come up with ways to make people appear foolish and downright silly. A few years ago it was hipsters walking along the street talking into their cell phones. Just when we were getting used to that (if, indeed, we ever did), along came those hands-free phones that give their users a very distinct aura of insanity as they jabber away into thin air. Next up will be mixed reality computing where special glasses or headsets project an image of a computer screen that appears to be just a few feet in front of the user. Of course, a virtual Windows will crash just as much as the real Windows does, so we'll be treated to the delightful site of an otherwise normal-looking person staring intently at what appears to be nothing and all the while cursing and gesticulating at whatever glitch has bedeviled him. I can't wait.

I'm grateful to Word Spy subscriber (and Wired Magazine's Jargon Watcher) Gareth Branwyn for alerting me to this phrase.
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