The more realistic integration of virtual objects is carried by blending them with the skin of the patient. The opacity of the skin is determined by several parameters, one of them is its local curvature (which makes the nose stand out). The registration of the scene is another feat of engineering, with three cameras (one of them infrared) on the head mounted device, and 6 more hanging from the room's ceiling. It's a far cry from what available for mobile-AR developers, but it shows that the industry has much to aspire to.
More details, here.