Michael Beigl made it more concrete and found coffee mugs (which were more than 20$ each) and attached a processor, communication and sensors. The MediaCup  showed several interesting results and underlined that such approach makes sense if there is an advantage.
Today I saw in an office of a former colleague in Munich two objects that had perceptual qualities and output (not really processing yet). One object is a plastic toad that makes a noise when you move and the other is a rubber pig that makes a noise when you open the fridge (reacts on change in level, but did not work). This made me wonder if we were only partially right – yes objects will have sensors included, yes there will be processing, but no there is no need that it makes sense. Or perhaps having it as a gadget is advantage enough...
 Schmidt, A., Aidoo, K. A., Takaluoma, A., Tuomela, U., Laerhoven, K. V., and Velde, W. V. 1999. Advanced Interaction in Context. In Proceedings of the 1st international Symposium on Handheld and Ubiquitous Computing (Karlsruhe, Germany, September 27 - 29, 1999). H. Gellersen, Ed. Lecture Notes In Computer Science, vol. 1707. Springer-Verlag, London, 89-101. DOI= http://dx.doi.org/10.1007/3-540-48157-5_10
 Gellersen, H. W., Schmidt, A., and Beigl, M. 2002. Multi-sensor context-awareness in mobile devices and smart artifacts. Mob. Netw. Appl. 7, 5 (Oct. 2002), 341-351. DOI= http://dx.doi.org/10.1023/A:1016587515822