To give a non-snarky answer, it does AR with external cameras and an incredibly low lag such that those who have tried it have said makes it almost natural (the resolution apparently isn’t perfect, but there is no discernible input lag when looking around which happens on other similar devices). But you can dial up the opacity to wind up in a fully VR environment. So, it is in fact, both.

Your question about software is a big one. Apple is advertising 1M apps available at launch (good) but these are iPad apps, which can run on Vision OS without any modifications by the developers (not so good). That does not mean it will be a good experience. I was listening to a podcast today where a developer clearly stated that after getting a chance to try their app on device at a lab, they totally stopped development because they missed the mark completely with their imagination and the simulator on how it should work. You’ll still be able to run their iPad app, but until they get their hands on their own hardware to iterate more rapidly, they’re giving up.

All that to say it’s unclear how many apps will be natively designed to work with it on launch, and if these will be any good.

Thankfully I don’t live in the US so I am immune to this particular reality distortion field. For now…