Basically there is a display inside which will display independant images to the left and right eye so that you get a bang-on 3D effect. The screen also offers a 90 degree field of view, so it's all encompassing. On top of that, there are accelerometers so that you can to some degree adjust your in game view simply by turning your head.
According to an article by The Verge, the HMD currently has only a 1280x800 display, which means you're getting a 640x800 res image to each eye. Hopefully they can at least double if not quadruple this number for release, but even so it is a very neat piece of technology.
While it is too early to tell, Carmack is hoping that when the display is finally finished it can be purchased as a hobbyist kit for around $500, which seems quite reasonable to me. I just hope it works with all FPS games! I might have to start a list of must-play games... you know, just in case.