In short: a tiny projector beams an image into the transparent lens so it floats over the real world, while small cameras on the frame watch the room and your hands so you can point and tap in the air. Flip the switch to see the hidden part light up.
Strip away the marketing and every pair of smart glasses is built from some combination of these three things.
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Quick answers
Do smart glasses need a phone to work?
Some do and some don't. Devices like Snap Spectacles run everything onboard and don't need a phone connected. Others, like Xreal, plug into a phone or laptop and use it as the brain for the display.
Can other people see what I'm seeing?
No. The image is projected only into your own eyes through the lens. Someone standing next to you just sees clear glass, with no floating screen visible from outside.
How do the glasses know where my hands are?
Small cameras built into the frame watch the space in front of you. Software looks at those camera frames many times a second and works out where your fingers are, so a pinch or a point can act like a tap on a screen.
Do all smart glasses show images in the lens?
No. Some, like Meta Ray-Ban, are camera and audio glasses with no display at all. Others use the lens itself as a screen. Check what a specific pair actually includes before assuming it can show you AR.