You can read only the bolded partsif you want a summary.

First some insight; If you open up an occulus rift, its basically a 7" lcd screen, a chipset to recieve the video and positional data, cables and a housing. Then take into consideration that Occulus isn't a hardware company (neither is their parent company facebook), so everything that goes into manufacturing their headset is outsourced.

Then some numbers. If you look up something like a nexus 7 screen replacement, you will find them for little as $40. Mind you, this is not just an lcd panel, its a screen, digitizer and gorrilla/hardened glass. And someone is making a profit after you make that purchase. Having said that, being that PM only needs a screen, it would cost sony no more than $15. Being that PM doesn't actually do any processing (the PS eye camera does that, the headset will cost sony a total of around $50 and maybe sold for $60. Or sold in a pack with the PS eye camera that currently retails for $60 or so for a total of $99.

Point is, PM will probably end up costing (headset and camera) around $99.

Why the killer app, neither MS or nintendo is doing this, and this is something that will resonate extremly well with the casual crowd and hardcore alike if user impressions are anything to go by. Basically, theer has not been one review or impression where that praises weren't heaped on the unique experience VR offers. Not a single one, and it seems like its easy for a lot of people to say how they don't want it or think it will work, but its obvious VR is one of those things that need to be experienced to be understood. So no one should take the opinion of people that haven't actually tried it out seriously. Besides, we all thought the wii was going to be a fad, yet look at what it did with the casual crowd.

Having said all that, the possibilities and usage scenarios of VR are ridiculous, especially outside gaming. And within gaming, VR stands to offer ways of playing both original VR focused games and literally reinventing certain already existing genres, like racers, flight sim and FPS games. And in all those genres mentioned, its not just a novelty control interface but stands to become as relevant as the controller evolving a second stick. It will make those genres better simply by its addition and so much so that once used you would probably not be able to magine playing games in those genres with out it. And this i just talking about the hardcore gamer. 

Possible usage case scenarios; I have a few I have in mind but rather then let this become a list thread I want to ask what you guys think; do you think that VR is the PS4 sleeper killer app? and what ways do you think it can be used for both for gaming and non gaming(porn, said it so don't) applications.

I think it can be a hit if it launches with software that really "wows" people. Just pay attention about the price because it isn't a regular display since it needs a very low latency and a quick screen refresh to avoid severe motion sickness and that is probably way more expensive than a regular LCD.

I would like to think that it will be the killer app, but it won't be in the sense that it will sell a lot. There won't be many games for it initially, and it will surely cost $200, so not a low price either. (The screen will not be a normal phone screen, there's complicated optics and so on.)
It will however be one hell of a thing to experience VR. Great things are coming from VR companies and games and more.

I am sure you are highly underestimating the cost of Morpheus. 100$, even 120$ with the camera? Double that, maybe.
Also it all depends on software support, I don't see many big third parties making games for it, until it is a success (at least not moneyhatted) but we already know about quite a few games in the making so it shouldn't be that bad.

I don't think it will be a smashing success, it will be a hard sell for Sony and big logistic operation, as I think the Best way to showcase VR is through demo stations in as many places as they can get them. And let's be honest it won't be a perfect experience as PS4 is simply not strong enough to provide high fidelity at 1080p 90 or more frames per second and bigger than usual field of view.
Still it will be the only really groundbreaking experience on consoles this generation it looks like, something that will distinguish PS4 from the others.

The more I think about it the more I realise I don't want it. It just seems like A TV shoved right in front of my face where I can turn the image using my head. I already have a big enough TV that takes up a fair chunk of my vision. Obviosuly VR tech has to start somewhere and you cant really skip straight to full body motion suits or whatever, but right now, I dont see the point in getting one.

ok i stopped reading after two sentences:

"You can read only the bolded partsif you want a summary."
and
"Point is, PM will probably end up costing (headset and camera) around $99."

Nope not until they can show the the non game fourm users why its something that they need

"Point is, PM will probably end up costing (headset and camera) around $99."

PM will cost at least $199.

There is no way the headset and camera will cost $99. Not even close. A Dualshock 4 and camera cost $110 (60 + 50). You expect the headset to cost less than a DS4?!?

I would be willing to accept a bet with you, with me taking the stance that it will cost more than $99.

$200-$300 with about 5 AAA games supporting it and you got a hit.