In a broader sense, physical computing is a creative framework for understanding human beings' relationship to the digital world.
In practical use, the term most often describes handmade art, design or DIY hobby projects that use sensors and microcontrollers to translate analog input to a software system, and/or control electro-mechanical devices such as motors, servos, lighting or other hardware.
In the art world, projects that implement physical computing include the work of Scott Snibbe, Daniel Rozin, Rafael Lozano-Hemmer, Jonah Brucker-Cohen, and Camille Utterback.
An example of physical computing modeling is the Illustris project, which attempts to precisely simulate the evolution of the universe from the Big Bang to the present day, 13.8 billion years later.
Tools like the Wiring, Arduino and Fritzing as well as I-CubeX help designers and artists to quickly prototype their interactive concepts.