We introduce a virtual physics laboratory, 'PhysLab', created using 3D video game technology suitable for advanced level physics courses in secondary schools. This comprises 32 simulated experiments covering a range of physics topics, selected in collaboration with practicing school teachers. PhysLab is made available at no cost for the physics education community as an installable application, ready to run, while giving the instructor some control over how information is displayed, and suitable ranges of experimental parameters. While we focus on the theory, design and pedagogical aspects of PhysLab, we provide some critical reflections on the use of simulations in physics teaching in general, and especially how these could be most effectively used in the physics classroom. The experiments are classified according to their nature: supporting theory; 'What if'-scenarios, like playing badminton on the Moon; or as hypothetical situations, such as what happens if you drop your home town into a hole through the centre of the Earth. It is not our intention to advocate the replacement of real practical work; we suggest various ways in which simulations can be integrated into the classroom, including instruction and real practical work. We also discuss the details of several PhysLab simulations: the Wilberforce Pendulum; oscillations of a mass on a rubber band, which involves non-linearity; the Drude theory of electrical conduction; the Cyclotron, and a 'Journey to the Centre of the Earth'.