I rather like Chris Crawford’s approach to defining interaction in terms of a conversation. He argues that interaction is “a cyclic process in which two actors alternately listen, think, and speak.” If we similarly use metaphor as a means of defining physical interaction, I would frame my definition in terms of a fight. ( Disclaimer: this might be a naive and misinformed metaphor as I am not really one to fight. )
A fight is iterative. Though the iterations aren’t as clear as in a conversation, there is constant feedback from the opposing actor to inform an appropriate physical response. In a fight one person observes how the other is moving. They then process this information ( is the opponent getting ready to attack? Is this a good time for me to punch? can I just run away and pretend this never happened? ) and adjust their behavior accordingly-- either protecting themselves or engaging. This feedback cycle, where physicial information is constantly flowing from one actor to another, is the stuff of good physical interaction.
With that in mind, we could begin to define physical interaction as an iterative process in which two actors observe physical behavior, process the input, and respond accordingly.