The verdict? It works, but it's not that fun yet. Sure enough, when the Drone's cameras picked up the weird pattern of black and white dots and/or the striped tube that the company attached to the top of a second Drone, the iPhone displayed a lock-on target or the weird robot that you can see above (that's the iPhone's video running out to a television, something that's technically a no-no under the current SDK). And when the drone moved around it, the display faithfully showed the 3D model -- it didn't look actually real, but you could fly around and interact with it. And after you blasted it with enough missiles, it exploded.
In short, we saw a prototype, not an actual game -- there was no scoring and no real goal except to show off the copter. Which is fine -- Parrot isn't a game developer. When I asked if they had anyone currently developing games for the device, they didn't have an answer. Eventually, the code will be open source, and anyone who wants to will be able to come along and develop for it, so we might get some playable games eventually, but from my impressions, that will have to be after the launch later this year.
I had much more fun just trying to fly the drone around -- while the AR will work great as a selling point, there's not any software up and running yet (that we've seen, anyway) that will really change the way you use the device. But that's probably fine for those who were already sold on picking it up -- it's fun enough just to fly the copter around.