We interrupt this teardown for a Science Party. Dim the lights, fire up the smoke machine, and bring the laser beams!

So when you put it all together, what does a lens in a VR headset actually do?

For the VR experience to be realistic and not cause great discomfort, you need the optics to do two things: magnify the display so that you can't see the edges (which would kill the immersion), and focus the display at optical infinity.

TL;DR: The Rift's lenses make up for your eyes' and the displays' shortcomings, making you think you're looking at an endless, distant display (instead of a TV screen glued to your face).