Alex Bouchet showed me those two vintage videos of the early days of the CAVE :

“(1991) before the CAVE was called “The CAVE” it was internally named the Pocket Cathedral (actually it was called the Closet Cathedral – or the Closet for short).
The CAVE was invented by the Electronic Visualization Laboratory (EVL) at the University of Illinois at Chicago.”

It seems CAVE stood for Cave Audio Visual Environment, then Cave Automatic Virtual Environment.

Dan Sandin says that CAVE refers to “both the early cave paintings and to the shadows of the ideal forms in Plato’s cave”.

(Update: Here’s another good introductory video to the CAVE system : 1993)