It is a bit of that and more of a technique. The VR isn't capable of treating all psychological cases yet, but in time I believe there is a possibility. Its specialties are anxiety disorder and fear. For example people who suffer fear of heights, need to go to such heights with their therapist to commence treatment.
But with the VR you dont need the heights nor the therapist. The VR projects a realistic visuality of such environments as required for a patients treament. Those who have fear of flight, it projects the visuality and sounds as being inside an air plane.
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