There is augmented reality in mortal kombat vita and reality fighters. you use the rear camera so the fight is in the background.
Some games need special AR cards. These cards contain markers which are scanned by the camera so the software can project the game content in a certain place. Only the markers are important. You can print these markers to create your own cards, or draw them on a wall or any other object. When the projection is running, you are free to move your vita console around and bring it closer to or away from the marker. The software will notify you if the marker cannot be scanned anymore, usually resulting in a pause in the game.