Introduction
We definitely have the technology to make a lot of Mario Kart aspects a reality. Imagine getting into a go-kart and donning a helmet with a built in HUD that shows a map of the course, the placement of the players...etc. All the helmets or go-karts are equipped with sensors and small computers. These computers are capable of communicating with a central server that lives in the office - or whatever. It is this main server that takes the data sent from each individual go-kart and appropriately updates everyone's HUDs. Here's a screenshot of the video game:

Let's go through each key feature...
#1. Shows what place you're in. This could easily be determined by calculating the GPS coordinates of each vehicle. If the GPS coordinates turned out to be unreliable (which I'd guess that they were), then, there are other ways. GPS is really just triangulation. So build your own triangulation system inside the track...
#2. This is where it get's interesting. Mario Kart has the concept of mystery boxes. Because you're wearing a HUD, these mystery boxes could be painted on the course for all players. Here's a list of the mystery boxes and a description of how each could work...All players can launch their item by a button on the steering wheel.

The green shell and shells are non-seeking. The reds are seeking. When you shoot them, they go in a straight line. The shell, before you launch sits in front of your kart. And when you have three, they circulate around your kart. All of this should be animatable (is that a word?) on your HUD. And when you launch it, your HUD can animate that as well until it makes contact with another player. This is, of course, all sent to the server. If the server detects a hit, it sends a signal to the go-kart that is struck and causes it to slow down, spin out (slightly), or whatever.
Banana Peels are easy too. Dropping the banana peel with the button on your steering wheel will send a signal to the main server. The main server will register the coordinates of this banana peel. Any subsequent player that lands on these coordinates will spin out.
If the player launches a mushroom item, the server responds by increasing the maximum speed of their kart for the duration of the mushroom.
I'll let y'all use your imaginations to think about the other items would be implemented..
#3. Time is simple. When the HUD says "GO", start a timer, and when the GPS (or equivalent) coordinates cross the finish line, stop the count.
#4. Because the coordinates of each go-kart are being broadcast to the server every, say, 100 milliseconds, the server is very capable of understanding how to register which lap the player is on by how many times it crossed a specific point.
#5. Again, because the coordinates of each go-kart are being broadcast the the server - the server is very capable of crunching this data and sending to each HUD, the location of all players on a map.
I'll let you think about how #7 would be determined by the server. Very simple stuff.
I don't have any experience with augmented reality, but I know this is totally possible, and may even already exist. By crossing real-life data computation with the video games we all love, you can come up with really great ideas. Augmented reality is going to change everything when Project Glass is released in 2014. Depending on how Google decides to open their Project Glass API... this could ride atop their software.
Monetization
Charge people in the same way go-kart places already do. Or come up with a more modern price model.
Problems
Legal issues with Mario Kart copyright. You would not be able to brand and market it this way unless you were sponsored by Nintendo, of course. You'd need to change all of the items and HUD positions etc. Would have to look into this. But even as a hobby, this would be an amazing project to work on.
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