Handheld projectors offer a new type of display modality, not tied to a physical screen or to a fixed projection area, yet providing a larger display than is available from a handheld device with fixed screen. This paper begins with a review of our prototype handheld projector, and describes our work on interaction using a cursor that can be tracked across the projection. The most immediate use for such a device is to support existing applications like web-browsing. We show examples of this type of application. But there is a broader question too - does a handheld projector support new types of application that are not available with a physical screen or a fixed projection? We describe two applications that illustrate how the combination of handheld projection plus interaction supports ways to interact with the physical world that are much more natural than via conventional displays.