With the introduction of its Project Alloy headset, Intel has introduced yet another buzzword to the growing list of virtual reality jargon: merged reality.

The company touts this as "a new way of experiencing physical and virtual interactions and environments through a suite of next-generation sensing and digitizing technologies." All well and good for Intel, but hardly illuminating for consumers who are only just being introduced to virtual reality and its affiliates.

The best way to think of merged reality is as mixed reality. Mixed reality combines elements from both the physical and virtual world into the same experience, in theory creating a more immersive experience. For example, you might be standing in a room that's been digitised into a virtual reality environment through a headset, but is still confined by spatial constraints of the real-world room.

A mixed reality headset is able to add additional virtual reality and augmented reality elements into the same space – game characters, HUDs, information screens and the like – while also letting you interact with real-world objects. Intel offers the example that merged reality would let you pick up a tennis racket and use it in a virtual reality tennis court.

Project Alloy would digitise your racket to bring it into the virtual word and, thanks to the headset's built in camera and sensors, would be able to track your movements within the physical space. This means you'd be able to play VR tennis without fear of tripping over a table, running into a wall or putting your racket through your TV screen.

The real-world spatial awareness of mixed reality devices plays into Project Alloy's touted six degrees of mobility. This lets the headset track the direction the wearer is moving in more accurately and translate that into the virtual world. For example, you might be able to experience a concert or sporting event through the headset but rather than having to watch from a static position, you'd be able to move around the environment to watch it from different angles.

Of course, specialist camera technology is needed to do this. Intel plans to use its Replay 360-degree camera tech to capture real-world environments from multiple angles and digitise them, turning them into interactive environments for mixed reality experiences.

Project Alloy isn't the only headset that blends the physical with the virtual. Magic Leap released a video in June showing off the capabilities of its own mixed reality device, which featured Star Wars characters interacting with physical objects in a real-world room. It's extremely impressive and a promising indication of the sort of thing mixed reality devices could bring to the table, although sadly in the case of Magic Leap, we know next to nothing about the device itself or when we might see it.

Microsoft also refers to its HoloLens as a mixed reality headset, despite the fact it leans more heavily towards augmented reality. Intel and Microsoft are now collaborating on a specification for mixed reality ready PCs and head mounted displays, and from 2017 all Windows 10 PCs will support mixed reality app and headsets. At the unveiling of Project Alloy, Microsoft demonstrated its vision of Windows in the mixed-reality era, which you can watch below.