It is the stuff of film-makers fantasies. From James Bond to the Six Million Dollar Man, the possibility of enhancing human capabilities with tiny, unobtrusive computers has been a source of perennial fascination.

Now the dreamers can be found in the corporate and university research laboratories. They speculate about a wearable computer with face recognition capabilities that could discreetly remind you of someone's name, whisper a translation of a conversation directly in your ear, or guide you to an unfamiliar address.

Before long, the dreams could become reality. Gartner, a Connecticut research company, describes wearable computers as one of the top 10 technologies to watch this year. It predicts they will remain a curiosity for the next three years, but will be mass market devices by 2006.

Wearable computers have already come a long way since the first - a cigarette pack-sized computer - was tried out at Las Vegas in 1961. This analogue computer sent information, based on an assessment of the speed of the roulette wheel, via radio waves to a hearing aid worn by the gambler.

Since then, the power and compactness of electronic devices have transformed the idea's potential. This was vividly illustrated by Stanford University's Wearable Computing Laboratory when, this year, it managed to shrink all the software required to drive a World Wide Web server into a computer the size of a matchbox.

Technology companies are taking wearable computers seriously. International Business Machines (IBM) recently unveiled a wearable PC in the form of a small box weighing just under 0.5kg that is worn on a belt. It is used with a headset - a transparent liquid crystal display panel that sits in front of an eye - and a controller, called the Tractile, which sits in the palm of the hand and is operated by finger movements.

It is expected to find applications in occupations such as surgery, mining, engineering and the military, where staff may have to refer to detailed information while using their hands and eyes to perform complex tasks.

MicroOptical, a Massachusetts-based company, makes tiny portable displays that are attached to ordinary glasses. A microdisplay on the glasses picks up a computer-generated signal. Reflectors in the lens magnify the image so that the user perceives the image floating in space two feet or more away.

Also active in wearable computing is Xybernaut, of Fairfax, Virginia. It sells a wearable computer with a wrist-mounted keyboard and wrist-mounted or headmounted visual displays. It is beginning to develop markets for its devices in manufacturing, maintenance, utilities and transport. "We are just starting to move past the piloting stage. It is a question of educating industry," says Ms Robin Bono of Xybernaut.

The company says the cost of its wearable computers has dropped from $20,000 (€19,600) four years ago to $5,000. This trend is set to continue, which could put them within reach of consumers in 18 months. "As it gets cheaper, it gets more and more into the mainstream," says Ms Bono.

Falling prices are just one factor in the development of wearable computers. In addition, they will become lighter and more compact. The battery of the Xybernaut computer weighs 1lb: as battery technology improves, the computer could become significantly more comfortable.

But some commentators think even more drastic improvements are required. In their current form, miniature computers may be too awkward and uncomfortable to be truly wearable. The next step, they say, will be integrating electronics into clothing.

"The tactile and material properties of what people wear are important to them, and people are reluctant to have wires and hard plastic cases against their bodies. Eventually, whole computers might be made from materials people are comfortable wearing," according to a conference paper by Mr Rehmi Post and Ms Margaret Orth of MIT Media Laboratory.

This vision is shared by a small number of designers.

ElectroTextiles, a start-up company based at Pinewood Studios in Buckinghamshire, has devised a method of mass-producing "smart fabrics". When touched they send out electrical signals indicating very precisely where the contact was made to a compact microelectric device attached to the edge of the fabric.

The fabrics are made by weaving a mixture of low resistance fibres, which are conventionally used for electromagnetic shielding, and high resistance carboncoated fibres used for static dissipation. The result is a flexible material that can be creased and folded.

Some of the potential applications cited by ElectroTextiles sound zany: a TV remote control built into the arm of a sofa, a rollup keyboard for a tiny computer, a keypad in a jacket sleeve and a mobile telephone in a tie.

But Mr Dave Sandbach and Mr Chris Chapman, the founders of ElectroTextiles, believe some applications could quickly become commercially viable. They think the first product - probably for the toy market - will be on sale next year. They are also working with the car industry on a self-adjusting seat that can sense the way the occupant's pressure is distributed.

Smart textiles could be a versatile alternative to conventional devices. But many commentators think they will play a minor role in the development of wearable computers in the immediate future. Mr Alexander Linden of Gartner thinks wearable computers are more likely to evolve along the lines of mobile phones.

Whatever form wearable computers take, they are part of a trend towards miniaturisation that has already moved computing power from the mainframe to the desktop, to laptop, to palmtop. With the ability to build equipment in miniature, the evolution of the wearable computer may come to seem as natural as the development of the personal stereo from home audio equipment or wristwatches from clocks.