Scientists have put Microsoft / Xbox Kinect sensors to great use over the years. One of these uses is in simulation of physical effects in terms of geography and mapping, ranging from topography to water flow. By now, many of these augmented reality interactive sandboxes are in action.
One of the most popular of these toolboxes is the aptly-named Augmented Reality Sandbox built by the UC Davis W.M. Keck Center for Active Visualization in the Earth Sciences for an NSF-funded project on informal science education. Learn the latest updates, and keep up with developments on the project page here and here. This sandbox works with a Kinect 3D camera and a projector to project a real-time colored topographic map with contour lines onto the sand surface. Mathematical GPU-based simulations govern the virtual water flow over the surface. This sandbox is already an interactive display at the University of California Davis Tahoe Environmental Research Center (TERC) and the Lawrence Hall of Science at University of California, Berkeley, among many other places. There are some cool demo videos for this sandbox, depicting real-time water flow simulation with respect to topography and virtual dam failure simulation, among others.
See a detailed article on Wired about this sandbox here.
A company from the Czech Republic offers their SandyStation augmented reality sandbox. Two good lists and descriptions of other virtual reality sandboxes all over the world are available here and here.