It may soon be time to add another acronym to your collection as mixed reality (MR) heaves into view. As part of Innovation Week, the week-long event being run by OMD UK, Arthur Tindsley and Frazer Hurrell, creative technologists at AOL's Partner Studio in London, demonstrated Microsoft's HoloLens and outlined how it differs from augmented reality (AR) and virtual reality (VR) options.

Virtual reality, as offered by the likes of Samsung Gear and Oculus Rift, is completely immersive and excludes the outside world. That leads to potential accidents as users forget that a table isn't real and go to lean on it only to fall on the floor. Plus they're tethered to a powerful PC that runs the applications. HTC Vive and Google Cardboard offer a different sort of VR experience using mobile.

Augmented reality has hit the headlines in recent weeks thanks to the Pokémon Go craze, but while that enables a crossover of real and virtual worlds, it is limited in its interpretation of the physical world. Objects can be placed there using geotagging but there's no depth of perception. "Pokémon GO has a gyroscope that allows it to know roughly where the Pokémon should be," Tindsley explained. "But it doesn't actually physically know from a technical perspective where it is."

The mixed reality offered by HoloLens, however, overcomes the restrictions of both. Thanks to a headset which Wired described as "part VR headset, part Google Glass, part Geordi La Forge's visor in Star Trek", users can move around freely as this contains all the computing power necessary to place holograms in their line of vision – no cables or phones are needed. And because the headset has depth trackers and sensors that are constantly mapping the user's environment, it can place these holograms into it in a way that allows users to move around them naturally while still being able to operate in the real world.

"You can use your environment as a desktop," added Furrell, using eyes and "airtaps" to identify and activate applications, as Windows 10 is "baked into" HoloLens.  "Imagine if you're in an office and everyone has one of these and everyone can see each other's content that they want to share."

It's not a cheap option, with a current price tag of £2,700, but it does open up some very different possibilities to those offered by AR and VR: walkaround engineering design, for example, or practical, hands-on guidance with things like plumbing or electrical repairs, or more significantly, in medical training.

And, of course, gaming may never be the same again. Adaptive games can use the constant scanning feature to place people and objects in different situations as it updates the room. Tindsley described playing a detective game at home in his living room. "There's a murder scene that goes on and you see this kid – it really shocked me, it threw me," he said. "You're playing a game but it's in your front room, you're looking down at your carpet and there is someone almost being shot in front of you."

Tie-ins to film franchises could develop in new directions. "Imagine the scarabs in The Mummy coming at you and you have to get out of the way of them and kill them," Furrell suggested. "But rather than just being in a white room, imagine putting someone in a tomb and then using that mixed experience to bring it to life. And we can record and stream everything you see."