Mixed Reality — or MR — takes AR one step further by detecting the participant’s physical environment and allowing the digitally generated reality to interact with that environment. Thus, unlike AR, where virtual objects can only sit on top of the background, with MR, virtual objects can move around and behind those objects.
MR differs from AR in that it requires a device that cannot only show the physical environment, but can also scan that environment to detect solid objects and their dimensions. Since this requires extra hardware, most commonly available devices that can do AR, are not candidates for MR.
The best example of the promise MR might offer in the future comes from the company Magic Leap. They are offering a headset that can scan the environment and add elements in and around scanned objects.
One important note: Because of their similarity, it is likely that the concepts of AR and MR will soon be collapsed into one concept, with people generally referring to AR for both.