So, “Virtual Reality” may not be quite the right term for this for it’s an impressive college design project.  Combining a pico projector with a head-tracking camera, they’re able to use the user’s head as an input device and display computer output on the screen in front of them, and they managed to hook it up to some mainstream apps like flight simulations and military FPS sims.

In this video, our group of three ECE students (two software engineers and one power systems engineer) made a project that allows for a more immersive gameplay environment. Your head, tracked via the webcam using face-tracking software, can be used as a control input to various computer games which allows for different gameplay experiences. The motorized projector moves along with your head to give you a view angle at all times.

via YouTube – University of Texas ECE Senior Design Open House Competition Playing Arma 2.
Check out the demonstration videos.