We review our recent proposal for a background-independent formulation of a holographic theory of quantum gravity. The present paper incorporates the necessary background material on geometry of canonical quantum theory, holography and space–time thermodynamics, Matrix theory, as well as our specific proposal for a dynamical theory of geometric quantum mechanics, as applied to Matrix theory. At the heart of this review is a new analysis of the conceptual problem of time and the closely related and phenomenologically relevant problem of vacuum energy in quantum gravity. We also present a discussion of some observational implications of this new viewpoint on the problem of vacuum energy.