Telefonica said it has picked HP's Aurasma technology to expand its mobile advertising offerings in one of the largest deals yet in the emerging market for augmented reality.

Augmented reality, or AR, overlays text or graphics on images viewed on smartphone, tablet and PC screens or through dedicated glasses, enabling features like image recognition.

The boom in smartphones led by Apple Inc's iPhone, which has location capabilities, cameras and sufficient processing power, has enabled people to try out AR technology for themselves.

The technology, which has been a feature of science fiction books and movies for decades, is expected to move into the mainstream in the coming years as chipset vendors have begun to incorporate it into products and large mobile firms like Telefonica pick it up.

Telefonica said it will use Aurasma's technology across its operations in some 25 countries, starting with Britain. The value of the deal was not revealed, but the companies said it was the largest-ever deal between an AR company and a telecom operator.

"We see this as a tipping point. This is the first time when a telco of its size is backing AR," Matt Mills, head of global partnerships at Aurasma, told Reuters.

Research firm Semico has forecast the market for augmented reality to be worth $600 billion by 2016.

Key rivals to HP's Aurasma include privately held companies such as Total Immersion, Metaio and Layar. Google is also planning to launch AR glasses and Nokia has unveiled an AR browser.