Virtual Reality (VR), sometimes called Virtual Environments (VE) has drawn much attention in the last few years. Extensive media coverage causes this interest to grow rapidly. Very few people, however, really know what VR is, what its basic principles and its open problems are. In this paper a historical overview of virtual reality is presented, basic terminology and classes of VR systems are listed, followed by applications of this technology in science, work, and entertainment areas. An insightful study of typical VR systems is done. All components of V R application and interrelations between them are thoroughly examined: input devices, output devices and software. Additionally human factors and their implication on the design issues of VE are discussed. Finally, the future of VR is considered in two aspects: technological and social. New research directions, technological frontiers and potential applications are pointed out. The possible positive and negative influence of VR on life of average people is speculated. 1.2. What is VR? What is VR not? At the beginning of 1990s the development in the field of virtual reality became much more stormy and the term Virtual Reality itself became extremely popular. We can hear about Virtual Reality nearly in all sort of media, people use this term very often and they misuse it in many cases too. The reason is that this new, promising and fascinating technology captures greater interest of people than e.g., computer graphics. The consequence of this state is that nowadays the border between 3D computer graphics and Virtual Reality becomes fuzzy. Therefore in the following sections some definitions of Virtual Reality and its basic principles are presented. 1.2.1. Some basic definitions and terminology Virtual Reality (VR) and Virtual Environments (VE) are used in computer community interchangeably. These terms are the most popular and most often used, but there are many other. Just to mention a few most important ones: Synthetic Experience, Virtual Worlds,