Yes, it does! It rotates as I rotate my head. Since the headset is attached to my head, it's 1:1 - if I turn 90 degrees the view also turns 90 degrees. Also, if I move to the side the point of view changes (parallax), so for example I can shift to better see a dial that was hidden behind the stick. Finally, the headset has one screen per eye so it gives a 3D effect.
All this together makes a striking effect. It feels like it puts you inside the game! I love it. The downside is that for the illusion to be convincing it needs to compute 90 frames per second so you need a beefy PC, and even then I have to lower the graphics setting a notch. But at least for me it's totally worth it!
I found an article that describes this better than I could:
http://www.mudspike.com/oculus-rift-cv1-first-impressions-with-dcs/