Finally there seems to be several initiatives underway to combine the power of GIS and Gaming together. This year's GeoDesign meeting had several speakers mention games as a potential for simulation of policy or design scenarios.
MITAR Games is a current project at the MIT Step Program http://education.mit.edu/projects/mitar-games that take augmented reality into the hands of teachers and students.
Another interesting AR platform is provided by Layar. This company based in the Netherlands provides a development platform for mobile devices and all kinds of fun, serious, useful, and weird augmentation is featured in their layer catalog, 400+ layers in the U.S. Still, playing pacman in real life, running around the streets of Columbus and being chased by those monsters...not sure, but absolutely sure I want to learn & develop tools for geography education.