This is a theory presented by mathematician Brian Whitworth ; PDF that suggests we are living in an information system known as a Virtual Reality.
This paper explores the idea that the universe is a virtual reality created by information processing, and relates this strange idea to the findings of modern physics about the physical
world. The virtual reality concept is familiar to us from online worlds, but our world as a virtual reality is usually a subject for science fiction rather than science. Yet the world could be an information simulation running on a multi-dimensional space-time screen. Indeed, if the essence of the universe is information, matter, charge, energy and movement could be aspects of information, and the many conservation laws could reduce to a single law of information conservation. If the universe were a virtual reality, its creation at the big bang would no longer be paradoxical, as every virtual system must be booted up. Ultimately, whether the world is an objective reality or a virtual reality is a matter for science to resolve.
The PDF is a 16 page publication that I introduce first as it’s short; to the point theory makes for an easy read to begin the discussion on this theory. The concept that we are existing in a virtual reality is not just Brain Whitworths summation alone, several other physicists; philosophers and scientists have proposed this hypothesis.
Physicist Tom Campbell  who worked for the DoD and Nasa published a trilogy of his accumulated knowledge in consciousness exploration stemming from and beyond his work at the Monroe Institute  setting up the laboratory and controls to explore a state known as mind awake / body asleep which is associated to being awake in conscious space when your body is asleep. Other terms for this are commonly known as lucid dream; conscious dreaming and out-of-body experiences.
Tom takes the concept of Virtual Reality into a full 820 page trilogy called “My Big Toe” which can be read on Google Books PDF and expands the concept into many Universes including a non-physical reality system which supersedes physical reality exponentially; the concept of “The Big Computer” and several analogies into concepts such as “Process Fractals” which are iterations used by TBC to evolve reality. His view also supports an evolving Universe; rather then one that has already evolved.
A Russian scientist named Sergey Datsyuk  has a publication called, “The Theory of Virtuality” which is a patient paste into google translate as it is completely written in Russian; HTML
TV is fundamental and universal metaontology, which makes it possible to propose inside itself a whole series of interdisciplinary theories, approaches, concepts and technologies: the theory of reality as the successor of set theory, the theory of construction through the levels of rate normativation and configuration, the theory of reflection and contraflection, theory of “AV”-models as construct-semiosis, the theory of continuum-apperception, technology of the immanent and conceptual apperceptions of objects and processes, the concept of relevant truth, theory of structural “AV”-model’s modality and comodality, the theories of the alternative sequence of events and alternative connection of processes, the concept of six-dimensional world and irregular realities, the theory of linguistic normativation, and also the approaches: to the theory of the work of the brain, to the theory of the artificial intellect, to the theory of networks, to the theory of processes, to the theory of communication.
Another virtual reality theory is known as “Multiverse Theory”. Multiverse Theory’ Holds That the Universe is a Virtual Reality Matrix.
“We may be a simulation … creations of some supreme, or super-being,” muses Britain’s astronomer royal, Sir Martin Rees, a staunch advocate of the multiverse theory. 
This theory is stoutly supported in a publication entitled: “ARE YOU LIVING IN A COMPUTER SIMULATION?”  BY NICK BOSTROM, Department of Philosophy, Oxford University HTML
This paper argues that at least one of the following propositions is true: (1) the human species is very likely to go extinct before reaching a “posthuman” stage; (2) any posthuman civilization is extremely unlikely to run a significant number of simulations of their evolutionary history (or variations thereof); (3) we are almost certainly living in a computer simulation. It follows that the belief that there is a significant chance that we will one day become posthumans who run ancestor-simulations is false, unless we are currently living in a simulation. A number of other consequences of this result are also discussed.
Our Virtual Reality Universe Written by Ian O’Neill Universe Today HTML  reflects on Brian Whitworths hypothesis;
What if the Universe was in fact a simulation? A product of some information processor, creating space and time, energy and matter? What if the Big Bang was the whole simulation booting up, beginning billions of years of space and time calculations? Can we possibly understand our consciousness as a subroutine in an advanced number crunching machine? A new paper published by the Centre for Discrete Mathematics and Theoretical Computer Science, University of Auckland, asks us to keep an open mind and suggests if we look at the complexity of physical laws of our known universe, many paradoxes may be explained if we view our physical reality as a virtual reality.
If we were living in a Virtual Reality; how would we know? If this is in fact some artificial reality created by a technology; who created it; what is the technology composed of and how to we test this theory?
Perhaps Craig Hogan’s theory that the Universe is a giant Hologram  HTML which gained attention when the GEO600 gravitational wave detector detected a fuzziness predicted by Hogan which implicates system found in holograms; helps reveal pixels in this virtual reality.
We have the theories; we have some plausibility in our current technology that may be in fact detecting the pixel by which the virtual reality is rendered. If this theory proves to be true; it will change everything we know about reality and information systems.
 The Physical World as a Virtual Reality by Brian Whitworth src
 “My Big Toe” by Tom Campbell src
 The Monroe Institute src
 The Theory of Virtuality by Sergey Datsyuk src
 Multiverse Theory’ Holds That the Universe is a Virtual Reality Matrix Sydney Morning Herald | July 22 2004 src
 “ARE YOU LIVING IN A COMPUTER SIMULATION?” BY NICK BOSTROM, Department of Philosophy, Oxford University src
 Our Virtual Reality Universe Written by Ian O’Neill Universe Today src
 Our world may be a giant hologram 15 January 2009 by Marcus Chown src