you need to use a "special SDK" to use it. In other words, it is the same shit as all those hobby engineer products.
Yes, the game needs to specifically be built to render at the appropriate FOV, draw in stereo with the appropriate eye separation, etc... and needs to implement head tracking.
As swiftcoder mentions above, there's a lot of community hacks/mods out for existing games already. Unfortunately, these will always be quite poor quality compared to a real integration (unless games allow mods to re-write their rendering pipeline and/or camera code completely...),
e.g. many simply re-route head-tracked movements to be interpreted as mouse movements, which is quite poor compared to an actual mouse + head-tracking camera set-up. In most head-tracked games I've played, your existing input devices control the absolute orientation of the camera/player/vehicle, while head-tracking is a separate relative orientation applied on top.
the Rift or headtracking (perhaps via the Kinect) would add great immersion to games without much work for developers and without much extra processing required.
I've been using a TrackIR5 for years, and yes, the added immersion is beyond words... The stereo vision and wide FOV of the oculus is another giant leap on top (but as I've reported in other threads, it's too far into the uncanny valley for my brain, and I get sick if I use it for more than 15-30 minutes. One hour of TF2 gave me over 12 hours of nausea when I tried to "push through" the warning symptoms at about 30 minutes).
As Samoth points out above though, developers need to make use of a specific SDK in order to support these kinds of peripherals, so not many games actually do support them -- the Arma FPS series (aka "DayZ"), some flight sims, and some racing games (Codemasters series is good) have head-tracking support, but it's not mainstream.
What I'd really like to see is a "de facto standard for devices that give 6DOF values" (with a single easy, usable API), so at least every mainstream program supports them, and supports them properly, and in the same way.
FreeTrack is already trying to do that for head tracking. Companies like NaturalPoint are fighting against them though... Hopefully Oculus cooperates with them.
Anyway, still hardly any devs support head-tracking... There's also facetracknoir, which doesn't require any peripherals besides a webcam (but is obviously less precise).
An API that supports all of the above would indeed be beneficial.