The firm is demonstrating a software-based machine-vision recognition system intended for smartphones and tablet computers that embeds images and videos directly on top of the image of a real object on the user's display.
Today so-called augmented reality is already widely available on both iPhones and Android phones through software applications like Google Goggles. Hundreds of other apps overlay geographical information on smartphone displays.
But Autonomy embeds moving imagery within the display of images of the real world in a way that's visually convincing. For instance, a game maker might use it so that a person holding a camera phone up to a building would see the building's image on the screen with a dragon entwined around it.
Called Aurasma, the software is based on the company's IDOL pattern recognizer, which has been stripped down to run on an iPhone 4.
Requiring all of the computing horsepower the hand-held Apple smartphone can muster, the software makes it possible for the phone to recognize a database of about a half-million objects. It then uses the iPhone's computing power to correctly insert a video image into the scene captured on the screen of the handset or tablet by its camera.
In a demonstration, the company was able to duplicate the effect seen in Harry Potter movies of newspapers with the people in their pictures coming to life. The software finds a video of an event captured in the photograph.
Autonomy plans to make Aurasma available as a free application on smartphones next month.
For consumers, the first application will be created by a movie studio that is working on an augmented reality game that accompanies the release of a new movie. It will be possible to hunt for hidden virtual reality objects in a city. By giving the underlying technology away, Michael Lynch, Autonomy's chief executive and founder, is hoping that he has an answer to the frequently asked question: "What comes after Google?"
There is now a broad consensus that the future of search will link search technologies with geographical location. Although the software can muddy the distinction between what is real and what is virtual, its most practical application would be in commerce and helping people search for bargains in the real world.
"We have been convinced for a long time that the idea of typing keywords into a search box is a byproduct and not an end," said Mr. Lynch. "If you're truly going to interact between the physical world and the virtual world, you're not going to do that sitting in your bedroom at the keyboard."
In addition to making the technology available on smartphones and tablets as an application, Autonomy intends to offer a free software module that will allow developers to build their own application. For example, a store or a shopping mall could customize a version for a shoppers who turn their camera phones on physical objects as they walk by. Autonomy already has partnerships with telecommunications companies in Europe, Russia and Latin America. Mr. Lynch said it was negotiating a similar deal in the United States.
Autonomy also plans to create channels for advertisers, hoping it can create something similar to Google's AdWords network.
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