For much of the past decade, Microsoft’s importance in shaping the evolution of consumer technology has been on a steady decline. With Apple slowly chipping away its dominance in the desktop and laptop operating system market, Microsoft’s abortive attempts at capturing market share in the growing mobile sector, one full of Apple iPhones and Google Androids, have all failed to bear fruit. Xbox, its most hopeful venture in the consumer sector, got off to a rocky start in its latest iteration and is playing catchup to the PlayStation 4. Microsoft Kinect, the motion controller for Xbox once considered innovative, was unceremoniously cast aside last year. Even Microsoft’s own investors think that the writing is on the wall and want the company to kill its Xbox, Bing and Surface divisions, essentially completing the transformation of the company into a pure enterprise service provider.

But last Wednesday, Microsoft received a much-needed boost to its public image as a tech innovator when it announced the HoloLens. This product needs some visual aids to fully explain, but essentially it is a true augmented reality visor that renders 3D graphics directly into your field of vision. Fans of cyberpunk science fiction would find the concept familiar. You can be looking at a table in real life and see virtual 3D animals running around on top of it. As you shift your head, the perspectives of the 3D renderings would change in real-time to maintain the illusion that these virtual objects are really sitting on the table in front of you. A writer at Ars Technica who got to try the live demo called the HoloLens “flat-out magical.” Various other tech bloggers described the experience as convincing, commenting that the renderings looked solid and believable.

Microsoft’s demos included a floating Skype window and Minecraft in your living room. This suggests that in spite of all the criticisms levered against Microsoft for not having a coherent vision for its forays into consumer technology, someone in the company has put some thought into how the disparate elements of the tech giant can fit into a new unified computing paradigm. As many commentators put it, suddenly Microsoft’s acquisition of Minecraft last year now makes a lot more sense.

Microsoft’s woes in the consumer sector have not all vanished in an instance. It will still be an uphill battle for Microsoft to win back the market share – and mind share – that it has almost completely lost to Apple and Google. However, one thing is certain: Virtual and augmented reality will be a huge area of growth for consumer electronics in the coming decade. While Microsoft has a track record of releasing impressive tech demos that they ultimately fail to develop into commercially successful products, the technical capabilities of the HoloLens demo appear to be cutting edge, putting the company in an extremely strong position to lead the coming virtual reality revolution.

Microsoft is not the only tech giant to stake a piece of the coming virtual/augmented reality market. Facebook did that when it spent $2 billion to acquire Oculus, followed by Google, which led a $542 million investment round in the augmented reality startup Magic Leap. By most accounts, Magic Leap is building a headset that does the exact thing that Microsoft demoed with its HoloLens. This essentially leaves Apple the odd one out, but Apple is also known for its ability to keep projects secret until the time is right.

With Microsoft’s HoloLens and Facebook’s Oculus Rift, it seems that the display technology for immersive virtual technology is rapidly approaching maturity. The main remaining challenge – and it’s not a small one – will be to figure out a new control paradigm that works well in a 3D virtual environment. Keyboards and game controllers are clearly not going to cut it. In Microsoft’s HoloLens demo video, wearers use hand gestures to interact with the virtual objects they are looking at. However, anyone who has ever used a Kinect can tell you that while motion capture technology is very cool when it works 90 percent of the time, the remaining 10 percent of the time make the technology completely unappealing when traditional controllers are more versatile and reliable. There are many hardware-based projects that are trying to solve the problem of accurate and granular motion capture today, but nothing seems to approach the maturity of personal 3D display technology that we are seeing from Oculus and Microsoft.

For those of us who grew up in the science fiction world of William Gibson, the coming decade will be an exciting time. With so much resources being poured into virtual and augmented reality, the future is bright. And for Microsoft, this brave new world will be perhaps a final chance to redeem its status as a consumer tech company.

Contact Raven Jiang at jcx ‘at’ stanford.edu.