I think the Oculus Rift VR headset has really made big improvements in the VR space. One of the key things it has solved is motion blur which caused discomfort for users previously. They have a developers SDK and kit which I am tempted to run some tests with. I see some interesting applications for interactive storytelling and also training specific skills. Oculus website here and some info about its potential from Wired here
With all the wearables showing up at CES this wear I found this tiny Arduino board called SquareWear which will enable you to create some interesting experiments. It has some built in sensors like temperature and light.
Sarien.net have done some amazing work creating a browser based emulation of some old classic adventure games such as Police Quest, Space Quest, Kings Quest. They have also done some very good work to make it useable on the iPad.
Some very good work here by openemu on creating a mac emulator for devices such as the GameBoy, SNES, NES, DS, and Sega Consoles with Lots of games.
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