Reality, or rather, your sole experience of reality, is something your brain is generating, not actually what's "out there". Your brain takes the raw electro-chemical signals signals of your senses and builds a kind of internal hologram-experience, a personal Matrix if you will, that is what you actually experience.

And since this is generated by your brain, much in the same way the dream experience is made, it is put together strongly influenced by the data already stored in your head.

This is why you could think you saw a snake in the dark on the grass, let's say, but then on closer inspection it turns out it's a watering hose.. Or some monster in the bushes that turn out to just be the bush behind it shaking in the wind.. Well I am sure you get what I mean.