It goes beyond that. The interesting thing is that in the moment you have a visual representation for an object, you can break it down into all its components. From that moment on the abstract object is represented by numbers only.

You can read more about it here: http://openhybrid.org/how-to-connect-everything.html

The interfaces them selfs are web pages.

The story written there doesn't make sense. Why the heck would I want to connect a button on my toaster to my mixer? Why not have a "Timer" object in my phone that can be connected to the mixer instead?

Because this kind of new visual interface is scaleable. You can operate 1000s of objects without a problem. This is something your app centric user interface would start looking like Times-Square. The Desktop-Metaphor is not scaleable with the physical space, because you need to remember the digital<->physical links in your own brain.

You can read a bit more about this problem here: http://openhybrid.org/learn%2c-setup%2c-operate.html

Regarding the webpage: That's an interesting perspective. I'm sure it's been considered before, but could the difference between the physical and digital interfaces result from complexity and not whether they are digital or physical?

I'm trying think of a complex physical interface - not one where the abstractions are buttons rather than a touch screen, but one without abstractions (if I understand your meaning on the webpage). Most man-made physical interfaces are simple, probaly for good reasons. A large sailing vessel, operated manually, is the best example I can think of, with the many sails, ropes, the rudder, etc. On one hand, my impression is that it's easier to conceive of them when using their physical interface; on the other I think an abstract UI could hide a lot of the complexity; for example it could present only the part of the interface I need for a particular task, hiding other parts and underlying mechanisms; also it could show helpful things that would be hidden in a physical interface, such as somthing blocked from view or info such as the stress on a mast or wind speed.

But I'm just thinking about it now; I assume someone has researched and thought about this issue ...

This desperately needs someone who can write in plain English to actually explain it without the MIT imagineering jargon. The video helps somewhat, but I suspect if someone described this in plain English it'd seem a lot less exciting than they want it to be.

Imagine you had a switch next to your bed.

Most likely, the switch controls the lights, which is perfect when you want to turn them off and go to sleep.

But maybe when you wake up, you'd actually want it to open the windows, or start the coffee maker.

And if someone else comes in to your room, maybe they'd prefer it if it started the audio system.

If we could manipulate all the physical objects around us with software, can we produce an environment which we can manipulate not just physically, but also electronically, to map our intents and needs as we have them?

And if we could, how would we go about "reprogramming" the world around us?

It's the ultimate vision of AR and "IOT".

IoT functions as services? Check out Java Jini developed way back in 1998: https://en.wikipedia.org/wiki/Jini

Right idea but it's implementation was very very clunky.