Virtual Reality (VR) is starting to be used in psychological therapy around the world. However, a thorough understanding of the reason why VR is effective and what effect it has on the human psyche is still missing. Most research on this subject is related to the concept of presence. This paper gives an up-to-date overview of research in this diverse field. It starts with the most prevailing definitions and theories on presence, most of which attribute special roles for the mental process of attention and for mental models of the virtual space. A review of the phenomena thought to be effected by presence shows that there is still a strong need for research on this subject because little conclusive evidence exists regarding the relationship between presence and phenoma such as emotional responses to virtual stimuli. An investigation shows there has been substantial research for developing methods for measuring presence and research regarding factors that contribute to presence. Knowledge of these contributing factors can play a vital role in development of new VR applications, but key knowledge elements in this area are still missing. 183