Depending on how loosely you define VR, it might only require a computer with a monitor and a keyboard or a mouse. Most researchers working in VR say that true virtual environments give the user a sense of immersion. Since it’s easy to get distracted and lose your sense of immersion when looking at a basic computer screen, most VR systems rely on a more elaborate display system. Other basic devices, like a keyboard, mouse, joystick or controller wand, are often part of VR systems.

Head-mounted Displays

A Head-mounted Display (HMD) is just what it sounds like — a computer display you wear on your head. Most HMDs are mounted in a helmet or a set of goggles. Engineers designed head-mounted displays to ensure that no matter in what direction a user might look, a monitor would stay in front of his eyes. Most HMDs have a screen for each eye, which gives the user the sense that the images he’s looking at have depth.
The monitors in an HMD are most often Liquid Cystal Displays (LCD), though you might come across older models that use Cathode Ray Tube (CRT) displays. LCD monitors are more compact, lightweight, efficient and inexpensive than CRT displays. The two major advantages CRT displays have over LCDs are screen resolution and brightness. Unfortunately, CRT displays are usually bulky and heavy. Almost every HMD using them is either uncomfortable to wear or requires a suspension mechanism to help offset the weight. Suspension mechanisms limit a user’s movement, which in turn can impact his sense of immersion.
A few HMD models use other display technologies, though they are very rare. Other display technologies include:

• Electroluminescent Displays
• Electrophoretic Displays (EP Displays)
• Fiber-Optics Displays
• Field Emission Displays (FED)
• Light Emitting Diode (LED) Displays
•  Plasma Displays
• Vacuum Fluorescent Displays (VFD)
• Virtual Retinal Displays (VRD)

There are many reasons engineers rarely use these display technologies in HMDs. Most of these technologies have limited resolution and brightness. Several are unable to produce anything other than a monochromatic image. Some, like the VRD and plasma display technologies, might work very well in an HMD but are prohibitively expensive.
Many head-mounted displays include speakers or headphones so that it can provide both video and audio output. Almost all sophisticated HMDs are tethered to the VR system’s CPU by one or more cables — wireless systems lack the response time necessary to avoid lag or latency issues. HMDs almost always include a tracking device so that the point of view displayed in the monitors changes as the user moves his head. (We’ll examine tracking devices in a later section.)
Some systems use a special set of glasses or goggles in conjunction with other display hardware. In the next section, we’ll look at such a system — the CAVE display.

Virtual Reality and the CAVE

Students and researchers at the University of Illinois – Chicago developed what many VR specialists feel is the most immersive display system for VR environments. It’s called the CAVE system, which stands for Cave Automatic Virtual Environment.
A CAVE is a small room or cubicle where at least three walls (and sometimes the floor and ceiling) act as giant monitors. The display gives the user a very wide field of view — something that most head-mounted displays can’t do. Users can also move around in a CAVE system without being tethered to a computer, though they still must wear a pair of funky goggles that are similar to 3-D glasses.
The active walls are actually rear-projection screens. A computer provides the images projected on each screen, creating a cohesive virtual environment. The projected images are in a stereoscopic format and are projected in a fast alternating pattern. The lenses in the user’s goggles have shutters that open and shut in synchronization with the alternating images, providing the user with the illusion of depth.
Tracking devices attached to the glasses tell the computer how to adjust the projected images as you walk around the environment. Users normally carry a controller wand in order to interact with virtual objects or navigate through parts of the environment. More than one user can be in a CAVE at the same time, though only the user wearing the tracking device will be able to adjust the point of view — all other users will be passive observers.
For more Detail: How Virtual Reality Gear Works