(Maybe a thread about larping misconceptions would be useful.)
There are also huge numbers of larpers who have nothing to do with the 'dressing up in semi-medieval costumes and having fights in the woods' (not that there's anything wrong with that). In essence larp is just roleplaying where you act out what your character is doing physically and speak in character most of the time. I've been involved in various larps that:
- had no combat
- used no random elements
- took place in the "real" world
- were played out in "normal" settings (a bar, someone's house, a hotel)
And in addition to the genres that people normally think of (D&D-ish, Vampire), there are larps set in science fiction universes, Cthulhu, modern day spies, Victorian England, superheros, suburban PTA meetings, Old West towns, etc., etc.
There are certainly drawbacks to larp as a medium for play, just as there are for tabletop, or forum play, or IM, or what have you. But there are also advantages that are harder to get in other forms, including a real sense of "being there". Which, yes, sometimes leads to some players blurring the lines a little more than one might like.
One big problem is that most larp groups are local; there's not a common world-wide infrastructure to tie people together, except for some cases like Vampire. So whereas you can talk to anyone in the world about your D&D 4e game and have not have to cover all of the basic concepts first, it's a lot harder to find common ground for the 10 person game you played last weekend that took place in the last four hours of the Titanic sinking, and which might never be played again because it was run completely off of 3x5 cards with rules that the GM made up the week before.