Design of physical devices and/or software applications for a more intuitive user interaction process with the functions of devices/applications.

Practised by full time interaction designers

Definition from IxDA Shanghai:

"Interaction Design (IxD) is the branch of user experience design that defines the structure and behavior of interactive products and services. While interaction design has a firm foundation in the theory, practice, and methodology of traditional user interface design, its focus is on defining the complex dialogues that occur between people and interactive devices of many types—from computers to mobile communications devices to appliances."

Slideshare created by David Malouf about the 'History of interaction design:'