VAR will be used for the first time in a competitive club match in England on Monday when Brighton host Palace in an all-Premier League tie in the third round of the FA Cup.
The former England manager, who has turned around Palace's season, was at the 2017 Confederations Cup in Russia as a television pundit when VAR was used and is concerned about the impact it could have.
"I experienced it during the Confederations Cup, albeit from a television studio," said the 70-year-old.
"It was chaotic there, so if you ask me what my opinion of it is, based on my experience of what happened during the Confederations Cup, it didn't work very well at all, because the communication between the referee and the guy on the machine wasn't working well.
"No one wanted goal-line technology and now we can't live without it so I am certainly not one of those people who would suggest there's no future for technology in the game. But the way our game is, and the fluidity of the game, and the way spectators expect the game to continue."
"Every time a player goes down injured, the fans get very frustrated when one player gets treated, be it their own player or an opponent player," he added.
"So there are a lot of questions to be answered with regard to how things can dovetail together, but if they can get it to dovetail together, and it stops gross injustices, then on our side of the fence we'd be all for it."
VAR technology will be used in what are considered "game-changing" situations, such as a goal, penalty or red card, and can also be used to help referees with cases of mistaken identity.
Palace were unfortunate earlier this season when Everton's Oumar Niasse won a controversial penalty in a 2-2 draw at Selhurst Park. He was retrospectively punished for diving.
It is under such circumstances, owing to human influence, when Hodgson believes VAR's flaws could actually be exposed.
"The rider then is what is a gross injustice?" he said. "How many times are you going to need to see the incident before you can have an opinion? If three people see an incident, are they going to all have the same opinion?
"A lot of things that I see flagged up on television, 'Was it a penalty? Was it not? Was it offside? Was it not?' After watching it for a long period of time and with other people alongside, we can't come to a conclusion because one person will say 'definitely yes', one will say 'definitely no'.
"How are we going to get to a stage where we only use it for the gross injustices? That's my fear."
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