From the original description of the concept: nanotechnology is based on the concept of tiny, self-replicating robots. The utility fog is a very simple extension of the idea: suppose, instead of building the object you want atom by atom, the tiny robots linked their arms together to form a solid mass in the shape of the object you wanted? Then, when you got tired of that avant-garde coffee table, the robots could simply shift around a little and you'd have an elegant Queen Anne piece instead.
Of course, utility fog technology will not be developed next week, but it is not incompatible with the laws of physics and seems a possible achievement of molecular nanotechnology before, say, the end of this century. Utility fog will be an example of Arthur Clarke's Third Law: 'any sufficiently advanced technology is indistinguishable from magic'. In the high science fiction universe developed by the Orion's Arm project, utility fogs, or "angelnets" are deployed on many advanced worlds.
Utility fog was originally thought of as a replacement for a seatbelt. The utility fog, in its normal state, would be loosely packed around the passenger and allow freedom of movement. However, when a car crash occurs, the utility fog will quickly join together and spread the impact of the entire passenger's body (performing the same thing as normal seatbelts except with less pressure on any individual part of the passenger's body)
In the artistic rendering to the left, taken from Orion's Arm, a future 'magician' is conjuring something out of thin air by instructing a utility fog to condense into a given shape. Such capabilities will bring to physical reality the power over the environment enjoyed by virtual reality users. In a future world with pervasive VR and utility fog technologies, virtual and physical reality will merge to a large degree.
- Utility fog on Wikipedia