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The definition of virtual reality comes, naturally, from the definitions for both ‘virtual’ and ‘reality’. The definition of ‘virtual’ is near and reality is what we experience as human beings. So the term ‘virtual reality’ basically means ‘near-reality’. This could, of course, mean anything but it usually refers to a specific type of reality emulation.

We know the world through our senses and perception systems. In school we all learned that we have five senses: taste, touch, smell, sight and hearing. These are however only our most obvious sense organs. The truth is that humans have many more senses than this, such as a sense of balance for example. These other sensory inputs, plus some special processing of sensory information by our brains ensures that we have a rich flow of information from the environment to our minds.

Everything that we know about our reality comes by way of our senses. In other words, our entire experience of reality is simply a combination of sensory information and our brains sense-making mechanisms for that information. It stands to reason then, that if you can present your senses with made-up information, your perception of reality would also change in response to it. You would be presented with a version of reality that isn’t really there, but from your perspective it would be perceived as real. Something we would refer to as a virtual reality.

So, in summary, virtual reality entails presenting our senses with a computer generated virtual environment that we can explore in some fashion.

Another answer is from:

Virtual reality (VR) is a computer-generated scenario that simulates a realistic experience. The immersive environment can be similar to the real world in order to create a lifelike experience grounded in reality or sci-fiAugmented reality systems may also be considered a form of VR that layers virtual information over a live camera feed into a headset, or through a smartphone or tablet device.

Current VR technology most commonly uses virtual reality headsets or multi-projected environments, sometimes in combination with physical environments or props, to generate realistic images, sounds and other sensations that simulate a user's physical presence in a virtual or imaginary environment. A person using virtual reality equipment is able to "look around" the artificial world, move around in it, and interact with virtual features or items. The effect is commonly created by VR headsets consisting of a head-mounted display with a small screen in front of the eyes, but can also be created through specially designed rooms with multiple large screens.

VR systems that include transmission of vibrations and other sensations to the user through a game controller or other devices are known as haptic systems. This tactile information is generally known as force feedback in medical, video gaming and military training applications.