The first VR sets I tried weren't some Nintendo gimmicks, but ones with actual 3D objects, displaying something akin to what people imagined "VR" back in the day (think "The Matrix" in the Shadowrun games). So the problem wasn't red dots, but that the novelty wore off pretty quickly.
The pictures of the cell phone and the Newton just prove that people won't mass-adopt things that are expensive and inconvenient, even if they are useful. I'd be really astonished if there will be widespread adoption of VR unless they get rid of the isolating headsets.
Next point is that even now AAA titles are becoming too expensive for their own good. Producing a AAA title in VR will cost even more. Unless procedural generation makes a huge let forward, those "hyper-realistic" experiences will be comparatively small.
Maybe it will prove to be a useful add-on for experiencing sports-events, shows and performances and adult entertainment from across the world. Unlike cell phones and the internet, it's something (a luxury) you need time and space for, so the hurdles for adoption are even higher and I don't really see a killer app for now.
Even the higher-end stuff was hilariously underspecced and didn't exactly deliver what was promised e.g. 263x230 resolution, 45° FoV making it look like you are staring at a TV through toilet rolls instead of 100°+ that almost envelops your entire Field of View:
http://www.futuremark.com/benchmarks/vrmark and using magnetic tracking:
I took the easy way out because someone mentioned the "Virtual Boy" on page one.
Granted it's still very early days and the first commercial versions of this kind of new VR using mostly mobile technology that the mobile industry have been pushing the past decade will start hitting 2-3 months from now, but it's a lot closer to "iPad" than the 90s "Palm Pilot" version of VR. Once these things get out into retail shops and people get to put them on and experience what they have to offer (especially children and teenagers, the "mommy, mommy, I want!" factor is
extremely high) I doubt the cat will ever really go back into the bag. Don't knock it till you try it.
A lot of the cheap $100 Mobile GearVR stuff that requires a Samsung Note is used for things like watching movies or series instead, since people can likely put them on during long flights or if they don't own a large screen and are alone, play around or "watch a movie" as if they are watching them on an IMAX screen or while on the moon:
http://www.samsung.com/global/galaxy/wearables/gear-vr/
They will also "get rid of the isolating headsets" with time/at some point, but again that would take years of working on form factor and getting the technology down to look more like glasses or similar, the Vive already comes with external cameras for AR. I'd view these first early models more like "
3dfx Voodoo" than "GeForce 880GTX".
Regarding AAA games, there's a lot less work required to "WOW" someone (especially the easily impressionable and children) in VR than it does on a monitor or TV screen, since you for instance can make them feel as if a Star Destroyer is falling on their head or the likes with about the same effort it'd require to do on a screen, but to a lot greater effect.
There are many other applications from entertainment:
http://www.rpgcodex.net/forums/index.php?threads/oculus-rift.79590/page-10#post-4021237 , art exhibits, attractions, industry production to Live sports/space mission broadcasts, education:
https://www.kickstarter.com/project...tual-reality-experience-education/description and the likes, although gaming will be a very important part of that pushing the hard-core market early.
There are also already various major pron studios producing "content" for VR:
http://www.vrpornix.com/