Oculus, meet Pixar.

Henry, the pixelated star of Oculus VR’s first animated virtual reality short, is an amiable hedgehog who loves, loves, loves to hug. Being a prickly fellow this creates an obvious pickle that leaves Henry sad and friendless, and as the 10-minute Virtual Reality short film Henry opens—with narration by Elijah Wood—Henry is celebrating his birthday solo.

Strapping on an Oculus Rift headset transports you into the colorful CG-animated treehouse that Henry calls home. A ladybug flits by, drawing your eyes down and across to take in a fully immersive environment with 360-degree views. When Henry makes his birthday wish hoping for friends to share his big day with, it comes true, bringing six balloon animals to life.

And, shortly, to death: Henry’s cruel fate means at least one of his new friends bursts its magical mortal coil, lending a bittersweet dramatic crux to the short, which I won’t spoil here.

After Facebook forked over a fortune to acquire Oculus VR, the Oculus Story Studio launched last year at the Sundance Film Festival to develop virtual reality “movies” that showcase the technology’s potential. The five current projects range from Henry to the immersive Bullfighter to Dear Angelica, a short film that thrusts the user into an illustrated world, and beyond. Henry is the first of the five experimental shorts set to debut early next year when the head-mounted Oculus Rift units officially hit the market. It’s also the most kid-friendly and, surprisingly, emotionally engaging in the way that the best Disney and Pixar output tugs on the heartstrings.

Premiering Henry to journalists this week in a ritzy Beverly Hills mansion, the studio’s creative director, Pixar veteran Saschka Unseld, emphasized a user experience that transcends traditional film, television, or even gaming. Feeling empathy in a virtual reality experience, rather than merely observing or touring a digital environment, is “most important,” he said.

To that end, Henry the hedgehog is aware that you’re standing inside his living room watching his story unfold. He makes eye contact during moments of high emotion—sadness, despair, elation—sharing in those feelings with the user in an perplexingly intimate, real-time way that can at first feel intensely unsettling, then wondrous.

Henry, Unseld insisted to a roomful of skeptical journalists, “is alive.”

The idea of creating an animated character that could somehow seem to be alive through tracking glances and eye contact came accidentally to Unseld and the small crew of around 15 staffers tasked with dreaming up experimental proofs of concept for Oculus Story Studios, most recruited from the worlds of animation and gaming.

“No one knew how it was going to feel in VR,” Henry director Ramiro Lopez Dau, a Pixar alum whose credits include Monsters University, Brave, and the 2012 short La Luna, told The Daily Beast. “Are we going to feel anything for this guy? Is it going to be awkward? Is it going to feel stronger or weaker than a movie? This medium is new. Maybe you just won’t connect.”

“It was fascinating,” Unseld added. “He looks at you when he’s feeling emotion, when he’s happy or when he’s sad. Conceptually it didn’t make sense but at one point we said, maybe in a quiet moment that should happen. And it worked. But it was experimentation.”

Unseld and Co. debuted their first VR film, the creature-in-a-forest tale Lost, last year at Sundance. They have the luxury of developing their slate of varied shorts at their own pace with no set quota from above or specific release dates to hit. “When they’re done, they’re done,” says Unseld.

The directive of the Oculus Story Studio, for now, is to push the boundaries of experimentation to show other creators what’s possible within VR storytelling. It’s only the tip of the iceberg in terms of how Oculus execs are investing in the expansion of VR experiences with an eye toward the future.

For a taste of that long-game vision I had to look no further than Palmer Luckey, the tech prodigy who built his first Oculus Rift prototype at the age of 18 and sold the company to Facebook last year for $2 billion. Now 22, the effervescent Long Beach native and public face of Oculus VR divides his time between the company’s Menlo Park headquarters and various global offices around the world.

I found Luckey, sporting his signature flip-flops, on a stone bench overlooking the Los Angeles skyline.

“I’ve always believed that people want to experience fantastic things that are beyond what they can do in real life,” said Luckey, grinning tirelessly in the sunshine. “People have never grown bored of doing things that are outside their own existence.”

Virtual films like Henry are comparatively conventional uses of the technology in Luckey’s grand plan. And while most consumers don’t know what Oculus Rift is—let alone are planning to buy one when they’re released in Q1 of next year—Luckey is certain that VR will be ubiquitous in the next few years to a decade.

“Quality is going to go up. There’s going to be more content, and a wider range of content,” he assured. “What if I said to you, ‘You can put on this pair of sunglasses and it’s a couple hundred dollars, but you can watch a VR recording of a sports game, or hang out with friends in a virtual café from all over the world?’ I think VR is for you. It just may not be for you right now.”

Luckey foresees a future in which telecommunication happens via VR: That long-distance conference call, hanging with bros in different area codes, gaming and meeting and exploring—we’ll all want to socialize virtually. He’s already tapped close friends to test a prototype version of Oculus Cinema, an application that will allow pals in different cities to watch movies together in shared virtual space.

“If VR continues to advance to where it’s similar quality to the real world—and it’s going to happen in our lifetime, and we’re going to get very close in another decade or so—then it will be the most human form of digital communication ever,“ he vowed.

What most laypersons know of VR comes from watching science fiction movies that tend to end horribly for the Luckeys of the world, the early-adopter visionaries pushing technology to its limits. But the movies get it all wrong, Luckey laughs. I rattle off the titles of a few VR classics.

“eXistenZ is a weird movie,” he exclaimed. “Have you heard the twist? The theory is that at the end when they come out and it’s super corporate they’re still actually in the game. But take The Matrix—[in the film] people plug into the Matrix to connect with everybody else.”

“The point is, VR doesn’t have to be isolating,” he continued. “Right now, people are isolated from other countries just by geography. But if you could easily mingle and communicate with people from all over the country and the world without ever having to get on a plane and burn gallons of jet fuel to get there, that’s a net positive for humanity.”

Virtual reality may help bring us closer to realizing artificially intelligent movie characters and save gas money on meetings at the office, but it’s also being exploited for the ultimate coupling of human and digital interactivity: virtual pornography. Is XXX VR a helpful step forward for the VR community?

“There’s a list of things people want to experience: fantastic things, and naked people. That will never change. We have naked people pictures going back to the cavemen,” Luckey smiled, pausing. “But I can’t go into that.”

The intensely bubbly, intensely private virtual reality wunderkind is mindful not to peel back the curtain too much on his personal life. He will admit to watching Game of Thrones and tech send-up Silicon Valley—“It’s eerily accurate,” he says of the latter. He was once approached to star on a reality TV show about tech billionaires: “They ran out of billionaires, went down the list, and got to me,” he quipped.

People often ask him what his hobbies are outside of VR, but this is the kid who was tinkering with lasers and Tesla coils at 11, spent years amassing perhaps the largest collection of head-mounted VR systems in the world, and raised over $2.4 million on Kickstarter from eager gaming fans he still engages with on Reddit before his 21st birthday.

“I love talking VR to people,” he said. “It was my hobby before, and it still is. I live in an apartment with six other people—all Oculus people! But mostly I’m a private dude. I’m not trying to be the new Kardashians.”