Virtual reality systems have emerged as a novel therapeutic tool in the areas of physical and cognitive rehabilitation. Virtual reality (VR) is broadly defined as an advanced computer interface that allows the user to have interactive simulations and hence become immersed within simulated environments. Virtual Reality systems allow precise and strategic control of complicated stimulus presentations to develop assessment and training environments. Encouraging results have been reported for applications that address human physical, cognitive, and reasoning capabilities. This study aims to present a structured analysis of the theoretical and pragmatic issues for this technology and a study of relevant work that has already been done. The study also looks at the future of Virtual Reality as a technology for cognitive assessment as well as rehabilitation.