In today's digitally driven world, human interaction has transformed significantly, particularly with the emergence of parasocial relationships and virtual influencers. This chapter applies Horton and Wohl (1956) parasocial interaction (PSI) framework to critically analyze how audiences connect with virtual influencers. It examines their appeal to younger demographics like Generation Z, who are more receptive to AI-driven figures, and explores how brands employ these influencers as marketing agents. Ethical concerns are highlighted, including transparency, manipulation, and the promotion of unrealistic standards. The chapter also questions the authenticity of virtual influencers, given their entirely orchestrated personas. Further, the chapter provides a comprehensive exploration of these developments, emphasizing the need for ethical responsibility as technology continues to blur the lines between the virtual and real worlds.