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The aim of this review was to survey scientific studies concerning the use of virtual reality (VR) for entertainment purposes with institutionalized older people and to identify factors that may affect users’ virtual experience. A systematic review of the PubMed and PsycINFO databases, following PRISMA recommendations, identified 149 scientific publications on the use of VR with older adults. Included studies used head-mounted display devices with institutionalized participants aged over 60, for entertainment purposes, to improve quality of life, or to enhance mental well-being. Out of the 149 identified publications, 10 studies were included in the analysis. Factors influencing users’ entertainment experience included: choice of content—particularly content that enabled reminiscence—the hedonic qualities of activities, and device ergonomics (choice of hardware). Limitations of use (adverse effects) were identified, and avenues for improvement were proposed. VR activities must be tailored to the intended objective and administered with caution, as adverse effects are possible.