If my grandchildren ever ask me where I was when I realised the internet was over – they won't, of course, because they'll be too busy playing with the teleportation console – I'll be able to be quite specific: I was in a Mexican restaurant opposite a cemetery in Austin, Texas, halfway through eating a taco. It was the end of day two of South by Southwest Interactive, the world's highest-profile gathering of geeks and the venture capitalists who love them, and I'd been pursuing a policy of asking those I met, perhaps a little too aggressively, what it was exactly that they did. What is "user experience", really? What the hell is "the gamification of healthcare"? Or "geofencing"? Or "design thinking"? Or "open source government"? What is "content strategy"? No, I mean, like, specifically?

The content strategist across the table took a sip of his orange-coloured cocktail. He looked slightly exasperated. "Well, from one perspective, I guess," he said, "it's kind of everything."

This, for outsiders, is the fundamental obstacle to understanding where technology culture is heading: increasingly, it's about everything. The vaguely intimidating twentysomethings who prowl the corridors of the Austin Convention Centre, juggling coffee cups, iPad 2s and the festival's 330-page schedule of events, are no longer content with transforming that part of your life you spend at your computer, or even on your smartphone. This is not just grandiosity on their part. Rather – and this is a technological point, but also a philosophical one – they herald the final disappearance of the boundary between "life online" and "real life", between the physical and the virtual. It thus requires only a small (and hopefully permissible) amount of journalistic hyperbole to suggest that the days of "the internet" as an identifiably separate thing may be behind us. After a few hours at South by Southwest (SXSW), the 330-page programme in my bag started triggering shoulder aches, but to be honest it was a marvel of brevity: after all, the festival was pretty much about everything.

We've been hearing about this moment in digital history since at least 1988, when the Xerox technologist Mark Weiser coined the term "ubiquitous computing", referring to the point at which devices and systems would become so numerous and pervasive that "technology recedes into the background of our lives". (To be fair, Weiser also called this "the age of calm technology", implying a serenity that the caffeinated, Twitter-distracted masses in Austin this week didn't seem yet to have attained.) And it's almost a decade since annoying tech-marketing types started using "mobile" as an abstract noun, referring to the end of computing as a desktop-only affair. But the arrival of the truly ubiquitous internet is something new, with implications both thrilling and sinister – and it has a way of rendering many of the questions we've been asking about technology in recent years almost meaningless. Did social media cause the recent Arab uprisings? Is the web distracting us from living? Are online friendships as rich as those offline? When the lines between reality and virtuality dissolve, both sides of such debates are left looking oddly anachronistic. Here, then, is a short tour of where we might be headed instead:

Web 3.0

"Big ideas are like locomotives," says Tim O'Reilly, a computer book publisher legendary among geeks, embarking on one of the grand metaphors to which the headline speakers at SXSW seem invariably prone. "They pull a train, and the train's gotta be going somewhere lots of people want to go." The big idea O'Reilly is touting is "sensor-driven collective intelligence", but since he coined the term "Web 2.0", he seems resigned to people labelling this new phase "Web 3.0". If Web 2.0 was the moment when the collaborative promise of the internet seemed finally to be realised – with ordinary users creating instead of just consuming, on sites from Flickr to Facebook to Wikipedia – Web 3.0 is the moment they forget they're doing it. When the GPS system in your phone or iPad can relay your location to any site or device you like, when Facebook uses facial recognition on photographs posted there, when your financial transactions are tracked, and when the location of your car can influence a constantly changing, sensor-driven congestion-charging scheme, all in real time, something has qualitatively changed. You're still creating the web, but without the conscious need to do so. "Our phones and cameras are being turned into eyes and ears for applications," O'Reilly has written. "Motion and location sensors tell where we are, what we're looking at, and how fast we're moving . . . Increasingly, the web is the world – everything and everyone in the world casts an 'information shadow', an aura of data, which when captured and processed intelligently, offers extraordinary opportunity and mindbending implications."

Alarming ones, too, of course, if you don't know exactly what's being shared with whom. Walking past a bank of plasma screens in Austin that were sputtering out tweets from the festival, I saw the claim from Marissa Mayer, a Google vice-president, that credit card companies can predict with 98% accuracy, two years in advance, when a couple is going to divorce, based on spending patterns alone. She meant this to be reassuring: Google, she explained, didn't engage in such covert data-mining. (Deep inside, I admit, I wasn't reassured. But then Mayer probably already knew that.)

The game layer

Depending on your degree of immersion in the digital world, it's possible that you've never heard the term "gamification" or that you're already profoundly sick of it. From a linguistic point of view, the word should probably be outlawed – perhaps we could ban "webinar" at the same time? – but as a concept it was everywhere in Austin. Videogame designers, the logic goes, have become the modern world's leading experts on how to keep users excited, engaged and committed: the success of the games industry proves that, whatever your personal opinion of Grand Theft Auto or World of Warcraft. So why not apply that expertise to all those areas of life where we could use more engagement, commitment and fun: in education, say, or in civic life, or in hospitals? Three billion person-hours a week are spent gaming. Couldn't some of that energy be productively harnessed?

This sounds plausible until you start to demand details, whereupon it becomes extraordinarily hard to grasp what this might actually mean. The current public face of gamification is Jane McGonigal, author of the new book Reality Is Broken: Why Games Make Us Better And How They Can Change The World, but many of her prescriptions are cringe-inducing: they seem to involve redefining aid projects in Africa as "superhero missions", or telling hospital patients to think of their recovery from illness as a "multiplayer game". Hearing how McGonigal speeded her recovery from a serious head injury by inventing a "superhero-themed game" called SuperBetter, based on Buffy the Vampire Slayer, in which her family and friends were players helping her back to health, I'm apparently supposed to feel inspired. Instead I feel embarrassed and a little sad: if I'm ever in that situation, I hope I won't need to invent a game to persuade my family to care.

A different reaction results from watching a manic presentation by Seth Priebatsch, the 22-year-old Princeton dropout who is this year's leading victim of what the New York Times has labelled "Next Zuckerberg Syndrome", the quest to identify and invest in tomorrow's equivalent of the billionaire Facebook founder. Priebatsch's declared aim is to "build a game layer on top of the world" – which at first seems simply to mean that we should all use SCVNGR, his location-based gaming platform that allows users to compete to win rewards at restaurants, bars and cinemas on their smartphones. (You can practically hear the marketers in the room start to salivate when he mentions this.)

But Priebatsch's ideas run deeper than that, whatever the impression conveyed by his bright orange polo shirt, his bright orange-framed sunglasses, and his tendency to bounce around the stage like a wind-up children's toy. His take on the education system, for example, is that it is a badly designed game: students compete for good grades, but lose motivation when they fail. A good game, by contrast, never makes you feel like you've failed: you just progress more slowly. Instead of giving bad students an F, why not start all pupils with zero points and have them strive for the high score? This kind of insight isn't unique to the world of videogames: these are basic insights into human psychology and the role of incentives, recently repopularised in books such as Freakonomics and Nudge. But that fact, in itself, may be a symptom of the vanishing distinction between online and off – and it certainly doesn't make it wrong.

The dictator's dilemma

Not long ago, according to the new-media guru Clay Shirky, the Sudanese government set up a Facebook page calling for a protest against the Sudanese government, naming a specific time and place – then simply arrested those who showed up. It was proof, Shirky argues, that social media can't be revolutionary on its own. "The reason that worked is that nobody knew anybody else," he says. "They thought Facebook itself was trustworthy." This is one of many counterintuitive impacts that the internet has wrought on the politics of protest. But perhaps the most powerful is the one that Shirky – himself a prominent evangelist for the democratic power of services such as Twitter and Facebook – labels "the dictator's dilemma".

Authoritarian leaders and protesters alike can exploit the power of the internet, Shirky concedes. (At least he notes the risks: in another session at the conference, I watch dumbstruck as a consultant on cyber-crimefighting speaks with undisguised joy about how much information the police could glean from Facebook, in order to infiltrate communities where criminals might lurk. Asked about privacy concerns, she replies: "Yeah – we'll have to keep an eye on that.") But there's a crucial asymmetry, Shirky goes on. The internet is now such a pervasive part of so many people's lives that blocking certain sites, or simply turning the whole thing off – as leaders in Bahrain, Egypt and elsewhere have recently tried to do – can backfire completely, angering protesters further and, from a dictator's point of view, making matters worse. "The end state of connectivity," he argues, "is that it provides citizens with increased power."

The road to that end state won't be smooth. But the compensatory efforts of the authorities to harness the internet for their own ends will never fully compensate. Either they must allow dissenters to organise online, or – by cutting off a resource that's crucial to their daily lives – provoke them to greater fury.

Biomimicry comes of age

The search engine AskNature describes itself as "the world's first digital library of Nature's solutions", and to visit it is to experience the curious, rather disorienting sensation of Googling the physical universe. Ask it some basic question – how to keep warm, say, or float in water, or walk on unstable ground – and it will search its library for solutions to the problem that nature has already found. The idea of "biomimicry" is certainly not new: for much of the past decade, the notion of borrowing engineering solutions from the natural world has inspired architects, industrial designers and others. Austin is abuzz with examples. "Nissan, right now, is developing swarming cars based on the movements of schooling fish," says Chris Allen of the Biomimicry Institute. Fish follow ultra-simple mathematical rules, he explains, to ensure that they never collide with each other when swimming in groups. Borrow that algorithm for navigating cars and a new solution to congestion and road accidents presents itself: what if, in heavy traffic, auto-navigated cars could be programmed to avoid each other while continuing forwards as efficiently as possible?

The Bank of England, he adds, is currently consulting biologists to explore ways in which organic immune systems might inspire reforms to the financial system to render it immune to devastating crises. "And what we're looking for now," Allen says cryptically, "is an interactive technology inspired by snakes."

'We are meant to pulse'

Until recently, the debate over "digital distraction" has been one of vested interests: authors nostalgic for the days of quiet book-reading have bemoaned it, while technology zealots have dismissed it. But the fusion of the virtual world with the real one exposes both sides of this argument as insufficient, and suggests a simpler answer: the internet is distracting if it stops you from doing what you really want to be doing; if it doesn't, it isn't. Similarly, warnings about "internet addiction" used to sound like grandparental cautions against the evils of rock music; scoffing at the very notion was a point of pride for those who identified themselves with the future. But you can develop a problematic addiction to anything: there's no reason to exclude the internet, and many real geeks in Austin (as opposed to the new-media gurus who claim to speak for them) readily concede they know sufferers. One of the most popular talks at the conference, touching on these subjects, bore the title Why Everything Is Amazing And Nobody Is Happy.

A related danger of the merging of online and offline life, says business thinker Tony Schwartz, is that we come to treat ourselves, in subtle ways, like computers. We drive ourselves to cope with ever-increasing workloads by working longer hours, sucking down coffee and spurning recuperation. But "we were not meant to operate as computers do," Schwartz says. "We are meant to pulse." When it comes to managing our own energy, he insists, we must replace a linear perspective with a cyclical one: "We live by the myth that the best way to get more work done is to work longer hours." Schwartz cites research suggesting that we should work in periods of no greater than 90 minutes before seeking rest. Whatever you might have been led to imagine by the seeping of digital culture into every aspect of daily life – and at times this week in Austin it was easy to forget this – you are not, ultimately, a computer.