Glasses Direct wins for its use of augmented reality tool that allows you to "try on" glasses virtually, and I have to say it looks pretty good, check it out: (email and RSS subscribers, if you can't see the video, click here).
Not only do augmented reality tools help customers make a more confident decision (and improve conversion rates), they also reduce returned merchandise by reducing the risk of ordering something that won't look good in real life.
Rich Relevance has a similar product for apparel called "Fashionista" which it demonstrated at the Shop.org Summit in Las Vegas. There's no doubt Fashionista is an amazing technology and many of the younger female set will find this fun. But superimposing a 2-Dimensional outfit is not the same as trying on a garment -- I don't think augmented reality for apparel will have the same impact on conversion and return rates.
Augmented reality tools are one more stop in the never-ending quest to make online shopping more like offline, and offline shopping more like online.