The Wall Street Journal are accurate. "People familiar with the project" reportedly confirmed that the hardware manufacturer developed virtual reality devices and has already filed one patent for the project.
The technology has seemingly been developed concurrently with a project called "Fortaleza," which translates to "fortress" in Portuguese. The projects are expected to result in a "suite of experiences unique to Microsoft's Xbox products," the report reads. This follows another rumor from last week that indicated Sony might announce its own virtual reality headset, as well as news from today showing Valve's continued support of VR through Steam.
One version of Microsoft's apparent foray into virtual reality uses augmented reality technology, which projects computer-generated visuals onto real-world images. Augmented reality devices have gained some traction recently: Ex-Valve employees managed to earn over $1 million on Kickstarter in November for their Cast AR headset, $400,000 of which came from just two days of funding.