If you have trouble wrapping your head around it, just think of the movie Inception when Joseph Gordon-Levitt was in a dream within a dream, and then did some bad ass gravity-defying kung fu in one of those dreams. Now just imagine using an Oculus Rift to simulate a virtual living room that has televisions in which you can physically turn on and play essentially any old-school game you wanted.
It's called EmuVR and it's capable of emulating any console game up to PlayStation 1 along with a slew of arcade MAME games too numerous to name. Players are set in a virtual living room/theater in which all televisions have real physics, so if you get angry at the second Dr. Wily stage in Mega Man 2, you can knock your virtual television off its virtual table, disconnecting your SNES and losing all your progress in the destructive process. Hey, we've all been there.
The most amazing thing about it is each pixel is virtually replicated as if it were displayed on a CRT television monitor, so you could walk up to the tube and zoom in on each glowing pixel in all of its RGB glory. This is more meta than what you can even begin to imagine, you guys.
Developer neozeroo is also making online play a thing, in which your friend can connect to your virtual living room and play alongside you, and you can see him/her hold the controller and look up and down which will correspond to actual head movements they're making in real-time with Oculus Rift. This is Jean Baudrillard's Simulacra and Simulation.
EmuVR isn't available for download just yet because the developer is looking for an artist to polish up his creation and bring it to the marketplace. However feel free to read the progress of this mind-bending simulation on EmuVR's official page.