There was quite a bit of discussion about this, back when PC’s got cheap. We were going to have interactive games, and you could create your own virtual world. Well, PCs are more powerful, and memory is chaep-how come nobody seems interested in VR any more? Is the technology still too difficult? Or are most people happy with regular games/
Uh… maybe you’ve heard of World of Warcraft, Second Life, EverQuest, Guildwars, EVE? The MMORPG genre is where mainstream virtual reality is today. If, perhaps, you mean Immersive VR… with goggles, gloves and weird tanks or suits kinda thing, yeah the hardware is somewhat lagging behind expectations. That the titles I’ve listed above are now considered ‘regular games’ speaks to how far VR has come.
I was involved in this industry about 10-15 years ago. It’s still around, although not nearly as big a fad as it once was. Some companies use the technology for visualization of large designs (automobiles or buildings). As for entertainment uses, there were and are some problems that make a VR headset impractical, but remember that first-person shooters like Doom are essentially presenting a VR world.
I can go on for quite some time about this stuff, if you have any specific questions. Also read the Wikipedia article on it; it’s a fairly good overview.
Yeah, my first thought was The Sims (that’s sooo last century, isn’t it? Sue me, I prefer our text-based virtual community here on the Dope.)
Funny sidenote: on Saturday, my 14 year old had a handful of friends over. Everyone brought their Nerf artillery. They went outside “to play World of Warcraft”. Gives me hope for the future, it does! 
There are a variety of technical problems that still haven’t been resolved:
1. Tracker latency and angular sensitivity. In order to prevent motion sickness the image in the headmount needs to track the motion of the user’s head as closely as possible. This turns out to be a very hard problem, particularly with regard to angular rotation. A very tiny head rotation can produce a large change in distant objects. In order to avoid “swimming” the tracker needs to be able to detect the user’s head orientation to a fraction of a degree in a few milliseconds and transmit this information to the renderer to begin constructing the scene. No one has figured out how to do this quickly enough yet.
2. Eye strain. Headmounts require you to keep your eyes converged on a display that’s only a few inches from your eyes for long periods of time. This rapidly leads to muscle fatigue. I don’t think anyone has a good answer for this problem.
3. Display weight. Sharp displays are heavy. Heavy displays throw off the balance of your head and wear out your neck muscles. We need a display that is light enough that you don’t notice that you have it on.
4. Display field of view. We get a lot of information through peripheral vision. To deliver that in a VR environment would mean increasing the size of the display ten-fold, with the accompanying increase in weight.
Basically, no one has come up with a display technology that doesn’t leave most people queasy and fatigued after fifteen minutes. And even if we do there is still:
5. Lack of haptic feedback. Many of our interactions with the real world are done by touch, not vision. So even if we can solve all the display problems, the final experience may still be crippled by our inability to phyically touch items in the virtual world.
There’s a new startup which features the technology to take a photo, analyze it, and create a 3D popup model for people to zoom through. TechCrunch posted an article about them: linky.
3D has changed its face over time. It’s now known that 3D immersion is much more difficult than had originally been assumed, and that we simply don’t have the ready processing power and graphical capabilities.
– IG
Pochacco offers a good overview of some of the problems. Another that I saw was how do you wear the headset and be free to turn your head or body, without getting entangled in the cable? It’s less of a problem if you’re sitting in an office chair in front of a computer, but what if you’re playing a game in the living room on the sofa?
Display weight, resolution and field of view are big problems, although when we were building displays in the 1990’s we would have been delighted to get some of the small LCDs that are now available and which can display 800x600 or 1024x768 (or more). Many of the early headmounted displays used LCDs from handheld televisions, which have relatively poor resolution.
Dewey, I’m curious where you were working in the 1990’s. We might actually have met each other. I was at UNC Chapel Hill with Fred Brooks’ research group.
No, we never met. I was at a crappy, poorly managed VR company in the New York suburbs. But we did try to get to as many of the conferences as possible. (They were fun, in that we always saw the same people, along with members of the general public who were fascinated by the idea of VR.)
What Happened to Virtual Reality?
You’re soaking in it.
VR is a bit of a tough sell to the general public for another reason: You look like a total idiot while playing.
As a consumer, I would be happy enough with a high-resolution non-tracking head-mounted 3D display.
But I’m not the consumer the industry caters to. 
I don’t know…a couple of years ago I was at CES in Vegas and saw a company that had a head mounted display for some FPS game…maybe Quake or Doom or something. Anyway, it was rigged up so that it would let you look around the world just like you could in the game…but using your head movement to turn the POV, rather than the mouse. Actually worked pretty well, but I’ve not seen anything like it commercially.
A quick google search turns up this site. I’m not sure if that’s what I saw, but it seems similar. So in a sense that gives you a feeling of “virtual reality”