Droid font has been deprecated in Ubuntu 16.04, and this causes the underline character to NOT render in the visual source code terminal. Change the font settings:
"editor.fontFamily": "Liberation Mono",
Okay but not as good:
"editor.fontFamily": "'Noto Mono', 'Droid Sans Mono', 'Courier New', monospace, 'Droid Sans Fallback'",