Aurasma, a startup with a new kind of augmented reality visual browser, is part of the mobile apps showdown at CES, and I got a taste of their technology in the somewhat unlikely setting of the Venetian Hotel in Las Vegas, courtesy of the company’s Matt Mills. Luckily this proves no object as, presented with an image that’s been tagged with content, it can bring that image to life with a video or animation, as you’ll see.

At CES the company has launched its new 3D engine, which enables, for instance, a children’s pop-up book to come to life with animated 3D dinosaurs which move around and roar. While there are other apps doing a similar thing, such as Blippar, Aurasma is banking on its user-generated content features to allow it to proliferate more virally.

Available as a free app for iPhone4, iPad2 and high-end Android devices or as a free kernel for developers, the app uses image and pattern recognition to recognise and understand images, then blending them with interactive content. Users can also create and share their own content by mapping it to an image in a location, like a building. The reason it needs high-end smartphones is because the technology, based on the company’s IDOL pattern recognizer, requires that horsepower to recognize a database of about a half-million objects and insert a video with 3D accuracy.

Because Aurasma can map a cylindrical shape of a bottle it’s also notched up UK drinks brand Lucozade to showcase limited edition bottles designed by some of the UK’s hottest music artists such as Plan B, Tinie Tempah, Wretch 32, Calvin Harris, White Lies, Kelis and Yasmin. Point the Aurasma app and a video appears of the artist talking in a ‘making of’ documentary.

The app launched in June last year and has had two million downloads so far and generated some 500 partners in fields such as retail, sport and automotive.

Developed by Autonomy – recently sold to HP Company – the company is still operating as a spun-out startup and may even raise venture capital to scale its offering, if it deems that necessary.