While we've seen plenty of experiments showing the potential for utilizing the upcoming Oculus Rift technlogy to fully immerse a player in a game world, we haven't seen anything quite like this.
Disunion is a guillotine simulator created over 48 hours as part of the Exile Game Jam. Players take up position knelt down with their head over a block, and are subsequently "beheaded" with spectators watching.
It's an intriguing use of the Oculus Rift VR technology, and really give an idea of what can be accomplished with the Rift outside of the obvious first-person shooter potential.
The simulation was created by Erkki Trummal, Andre Berlemont and Morten Brunbjerg. Check out the Exile Game Jam website for more information on the event.
It is innovative. However, one of the main things that the talk at GDC (What Valve learned from porting Team Fortress 2 to the Oculus Rift) stressed was do not mess with the horizon unless if you want your players to get very disoriented and/or sick. So as a game jam entry it is pretty cool but I would hesitate before implementing it in a game.
Unless of course you wanted them to feel sick and disoriented. I could see this happening with Death/dying, or even as a horror tactic. Hallucinations could be another implementation.