Situated computing concerns the ability of computing devices to detect, interpret and respond to aspects of the user's local environment. In this paper, we use our recent prototyping experience to identify a number of challenging issues that must be resolved in building wearable computers that support situated applications. The paper is organized into three areas: Sensing the local environment, interpreting sensor data, and realizing the value of situated applications. We conclude that while it is feasible to develop interesting prototypes, there remain many difficulties to overcome before robust systems may be widely deployed.