What prompted Oculus to sell to Facebook?

It's possible that Palmer Luckey was not the driving force behind this. The CEO they brought in, Brenden Iribe, has an established track record of growing and flipping tech companies to big incumbents. It's also unknown how much of an equity stake the founders relinquished in their 1st round of funding. They may have been pressured into this All appearances indicate a lot of incestuous wheeling and dealing among a bunch of experienced industry insiders.

From a more practical standpoint, Oculus set the bar very high for itself and may have recently realized that it was going to be nigh impossible to release a final consumer version by the end of this year that met its quality benchmarks, at an affordable price, while simultaneously continuing to develop and iterate on their technology, without a massive infusion of cash and resources up-front. The terms of the Facebook deal may have given them exactly what they needed to fulfill their original vision for the hardware, at the cost of alienating the vast majority of their enthusiasts and early adopters. It also guarantees that Facebook will control the Oculus ecosystem, which could be its undoing.

The ideal for virtual reality is an organic and emergent Metaverse of content. By essentially becoming the interface for some yet to be developed Facebook VR platform, they have stunted their own potential significantly, but also may have planted the seeds for a mainstream VR industry that will inevitably facilitate their end goal. So maybe Oculus is "taking one for the team" to ensure a VR saturated future. on the other hand, if Facebook uses any patents to stifle competition in the VR space, Oculus's tragic foray to the Dark Side will be complete.