I know of at least one older version of the idea of virtual reality, Descartes' "evil daemon".

The evil daemon presents a complete illusion of an external world, including other people, to Descartes' senses, where in fact there is no such external world in existence. The evil genius also presents to Descartes' senses a complete illusion of his own body, including all bodily sensations, where in fact Descartes has no body.

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Also, this thread gives me another chance to recommend David Deutsch's The Fabric of Reality.

I think the Matrix highlights the central fallacy of lots of different supernatural systems of belief, like Hinduism/Buddhism as described by mohit_117. Namely, that there are two realities, the one we perceive and the real one.

While I agree that our perceptions of reality may be way off (see Plato's "Allegory of the Cave"), I don't think that rises to the level of nested dream or Matrix-style realities.

But if we are to assume that we are living in some kind of simulation, it seems arbitrary to assume that we are just one "floor" away from "true" reality (the Programmers, Dreamers, God...). Why not three, seven, or a thousand layers deep? We are in a Matrix programmed by people living in a Matrix created by yet another group of Matrix residents. Dreamers within a dream dreamt by dreamers themselves dreamt by a dreamer.

Choosing just the two layers seems to me to be merely a convenient way of placing your own moral and philosophical preferences in realm of the "true" and "real", above and beyond ordinary reality. I tend to think that what we see is what we get. If you're going to start introducing layered realities, who gets to say where they stop?

I think it might be fairer to say that Hinduism is the oldest organized religion still practiced today. It seems probable to me that there were older systems of belief that predated record-keeping and which have since died out. Maybe we could even count generic animism or pantheism, although they may not be organized enough to warrant the "religion" label.

I just finished a beautifully illustrated summary of the Ramayana by the way. Great story. Jaya Rama! Jaya Hanuman!