Only one word was uttered when we first saw the video (below) of the Word Lens app: wow.

But we’re cynical and wizened enough not to be taken in by a flashy demo video. Does this app actually manage on-the-fly, augmented reality translation? It only blooming does.

The first thing to note is while this app might be free, if you want the translation feature you have to pay £2.99 for the language pack. Right now, it can only translate from Spanish to English and vice versa, and somewhat cheekily you have to pay twice to get both.

That said, three quid is a small price to pay for the magic that unfolds. Point the camera at a decent-sized chunk of Spanish text and within a couple of seconds you’ll get a rough and ready translation. And most magnificently of all, the translation is overlaid, at the correct size, on the original object.

Take this notepad for example, where the Spanish language is the second from the bottom – not the rather more amusingly botched translation of French from the second row from the top:

Funnily enough, we didn’t have vast quantities of Spanish signage knocking round the PC Pro office, so we resorted to looking up Spanish signs on Google. And even when scanning images from a computer screen, the translator does a remarkably effective job – even retaining the perspective of this angled street sign:

And even signs with relatively quirky fonts, such as this:

It’s not flawless. The translations are of the pidgin English that we’ve come to expect from computerised services such as Babelfish and Google Translate – enough to get the gist, if far from grammatically perfect. Words occasionally go missing. And it (predictably) failed to recognise handwritten notes or dense banks of text, such as the Spanish instructions for a router in our cupboard.

So, its practical applications are going to be few and far between. But this is the only iPhone app we’ve ever tested that’s had members of the team crowding around, gagging to have a go for themselves. And for that reason alone, it’s our iPhone App of the Week – if not the year.

Want more iPhone apps? Try our 73 best iPhone Apps feature or our previous iPhone Apps of the Week.