We present an immersive virtual reality (VR) application for physics education. It utilizes a recent physics engine developed for the PC gaming market to simulate physical experiments correctly and accurately. Students are enabled to actively build their own experiments and study them. A variety of tools are provided to analyze forces, mass, paths and other properties of objects before, during and after experiments. Innovative teaching content is presented that exploits the strengths of the 3D virtual environment. Physics Playground serves as an example of how current technologies can be combined to deliver a new quality in physics education.