Off-chain bitcoin payments are going to be an increasingly used payment mechanism if only because it addresses two issues with bitcoin payments: anonymity and confirmation time.
These off-chain transactions are going to be digital in nature, not through the exchange of inert notes (the construction of which is completely infeasible and impractical).
Honestly, i'm not sure about how "off-chain transactions" work. I've heard them being referred to before, but i'm not sure how they work exactly. Some details would be great. I can't understand how they are done without requiring an external instrument such as a note, or in this case, a virtual note.
It is theoretically possible to do off-chain transactions totally electronically. Here's one approach :
The required technology for this particular scheme will be commonplace (ie: in the vast majority of phones and desktops) by the end of the decade.