Drones have become synonymous with US military strikes in hotspots like Afghanistan. But now a French firm has built a mini version piloted by an iPhone that brings video games to the streets.

The flying saucer-like AR.Drone -- AR stands for augmented reality -- caused a sensation when it was revealed to an unsuspecting world at a trend-setting consumer electronics show in Las Vegas last week.

This week its creators gave AFP a demonstration near their company's offices on the Canal Saint-Martin in Paris, where the "quadricopter" perplexed and impressed passers-by on a cold winter afternoon.

One of the 10 engineers who spent four years developing the drone tapped a button on his iPhone to lift it off the ground and make it hover near the dark waters of the canal.

Then he tilted the phone forward or sideways to make it manoeuvre around nearby trees and park benches.

The machine's four propellers whirred quietly as it moved through the air, its camera streaming live video from two cameras, via wi-fi, to the pilot's phone.

The drone moves at 18 kilometres (11 miles) per hour, can stay airborne for 15 minutes after a 60-minute battery charge, has a maximum range of 50 metres (yards), and weighs just over 300 grams, or half a pound.

Its automatic flight stabilization makes it far superior to any other flying toys currently on the market, the company boasts.

"We used very sophisticated technology to develop it -- technology that is used in military and commercial drones," said Henry Seydoux, the founder of Parrot, the company that makes the toy.

The AR.drone is fun to pilot and would probably be a huge hit if it did nothing else but fly around and astonish onlookers.

But its creators have much bigger plans for it: video-gaming.

They insist this is their only motivation and that they have no interest in having their machine used for aerial photography, spying or anything else.

Back inside their offices, the Parrot team proudly displayed their machine's capacities.

An engineer sent the drone into the air and as soon as its cameras spotted targets he had set up around the room, these were transformed on the iPhone screen into virtual robots at which he could then fire missiles.

Placing a beacon that serves as a target on other drones permits two or more players to engage in aerial combat indoors or outdoors.

This is the augmented reality aspect -- merging the physical world with the virtual world.

"This drone will let kids play games not only on their computers but in the garden, the country, or on the beach," said Seydoux of Parrot, which employs 450 people and has previously specialized in hands-free wireless systems.

"A child can pilot it. I wanted to make something that is both very easy to use and safe," he said.

The augmented reality gaming his engineers displayed was basic, but they point out the the AR.Drone is built on an open platform and the company is inviting outside developers to create games for the device.

The prospect of augmented reality robot battles is causing much excitement in the gaming world. Gaming websites have been awash with comment since the AR.Drone hovered over the heads of awed visitors to the Las Vegas tech show.

The Games Blog of Britain's Guardian newspaper said its prediction was coming true that "we'll all one day be indulging in real-world death matches, commanding robotic slaves into battle on the streets of our towns and cities, as we control the carnage via our computers."

Augmented reality applications already exist in the fields of medicine, defence, navigation, education, and in gaming.

But many observers are touting the AR.Drone as heralding the next big thing in the world of video games, which in 2009 was worth more than 50 billion dollars (35 billion euros) worldwide, according to industry figures.

But gamers will have to be patient. Parrot says only that their drone will go on sale some time this year, and they refuse to confirm the price of 500 dollars that has been bandied about in the press.