"Dennō Coil" is set in a near-future world where augmented reality (AR) technology has become deeply integrated into daily life. The story revolves around a group of children who navigate both the physical and digital layers of their environment, using AR glasses to interact with virtual objects and creatures. The narrative primarily unfolds in the fictional city of Daikoku, where the boundaries between the real and virtual worlds blur, creating a complex and immersive setting.

The protagonist, Yūko Okonogi, moves to Daikoku with her family and quickly becomes involved in the local children's subculture centered around AR technology. She joins a group of kids who use their AR glasses to explore the city, solve mysteries, and battle virtual creatures known as "Illegals." These Illegals are rogue programs that disrupt the digital environment, often causing real-world consequences. Yūko's curiosity and determination drive much of the plot as she uncovers the deeper mysteries of the AR world.

Key characters include Isako, a skilled and enigmatic girl who leads a rival group of children, and Fumie, Yūko's younger sister, who provides a more innocent perspective on the AR world. Yasako, another central figure, is a quiet and observant girl with a mysterious connection to the Illegals. The children's interactions with each other and their environment reveal the complexities of their relationships and the ethical dilemmas posed by the pervasive AR technology.

The plot thickens as Yūko and her friends discover a hidden layer of the AR world known as the "Coil," a secretive and potentially dangerous space where the rules of reality are distorted. The Coil becomes a focal point for the story, as the children uncover its origins and the role it plays in the broader AR ecosystem. Their investigations lead to encounters with shadowy figures and organizations that seek to control or exploit the Coil, adding layers of intrigue and tension to the narrative.

Throughout the series, themes of technology, identity, and the consequences of human innovation are explored. The children's adventures highlight the dual-edged nature of AR technology, showcasing its potential for both creativity and harm. The story balances moments of lighthearted exploration with darker, more introspective elements, creating a nuanced portrayal of a world where the digital and physical realms are inextricably linked.