In 1963, Ivan Sutherland developed an interactive computer program called Sketchpad which was the first to use a Graphical User Interface. The user could draw directly into the screen using a pen like device called light pen.
In 1968, Ivan Sutherland along with his student Bob Sproull demonstrated a system that is believed to be the first head mounted display system with three-dimensional tracking capabilities called Sword of Damocles. The setup consisted of stereoscopic display system displaying an output from a computer program which updated itself according to the movements of the user.
Fig 1. Ivan Sutherland's first VR Head Mounted Display, The Sword of Damocles
Image Source