All forms of storytelling, including movies, involve creating some kind of fictional world which starts out in the mind of the storyteller and winds up in our own. This fictional world can contain as few or as many aspects of the real world as the storyteller wants, depending on the needs of the story. So the world being spun out of the story may or may not itself contain the art of telling stories.
Usually it doesn't; ontological meta-melange rarely results in making your message to the audience clearer. Unless of course, you are telling a story about telling stories.
I have noticed that there is a hidden subgenre of films which comment in one way or another on how our culture deals with the fact that so many of our entertainments rely on acts of falsehood, mimicry, and subterfuge — behaviors that in the course of normal life we usually condemn. The simple act of acting, as well as the not-so-simple act of recording color images of staged action, involves pretending in the truth of known falsehoods, with the assumption that the audience will pretend, temporarily, to believe them.
As our entertainments continue to improve in their resemblance to real life, and as real life continues to involve various kinds of simulacra as part of normality, it was inevitable that we would start to notice that the wall was becoming very thin. Eventually artists would have to comment on the fact that things like movies were an indelible part of modern society, and if you wanted to set your movie in modern times, you would need to at least tacitly acknowledge that your characters would know what a movie was.
Characters talking about real movies that exist in their world is a powerful statement of identity with the audience, but the concept can go further than that. Movies containing movies can show how the power of modern storytelling distorts characters' subjective experience of reality to the point where it seems like the boundary between reality and fantasy dissolves.
I'm not talking about fantasies like Last Action Hero and The Purple Rose of Cairo in which the boundaries of reality are literally eroded; I'm talking about the more interesting cases where the appearance of such erosion causes real-world psychic confusion of a sort that simply did not and could not exist prior to the modern taste for high-"fidelity" storytelling.
The cases I have uncovered fall into roughly three categories (if you think of another category, comment below):
Type I: "How adorable. The actors are going to play war with me."
The first and easiest class of movies to typify this subgenre involves situations where performers, used to performing a role, are mistaken for their characters and thrust into real-world versions of their fantasy worlds. Here they must confront both the inaccuracies of the fantasy as well as their own feelings of inadequacy.
In ¡Three Amigos!, an early twentieth-century rural Mexican enters a church to ask the Holy Mother for guidance in dealing with an army of banditos, only to find a film being projected on the altar. In what is likely the first film she has ever seen, she watches a tale about a trio of wealthy Spanish landowners who "fight for the rights of peasants," taking gun in hand to do battle with banditos exactly like the young woman sees every day. Due to an ontological misunderstanding about the nature of the medium, she does not grasp that these men are American actors whose apparent feats are carefully orchestrated illusions in the service of telling a story, and she invests all of her hopes on hiring them to "stop the infamous El Guapo."
A Bug's Life gives us a simpler version of the same story: a yokel seeks deliverance from an antisocial threat, and he mistakes a troupe of circus performers' bravado in a bar fight as evidence of their efficacy on a real field of battle. In this case there is no McLuhan-esque media confusion, just desperately selective hearing and farcical bad luck. Flik nevertheless invests all of his hopes, and the hopes of his colony, in convincing them to come protect them.
Galaxy Quest finds its ersatz heroes in yet a third medium, science fiction television, and the plot-crucial misunderstanding is a result of an even more acute cross-cultural disconnect, this time not driven by class or technological sophistication but by entirely competing systems of thought. The Thermians have no concept of fiction in their culture, and they assumed that the stories of the crew of Protector leaking out of Earth's magnetosphere were embedded reporting about a real team of intrepid space warriors. They invest all of their species's hopes on the assumption that by watching television they have completely grasped the nature of Western Terran Civilization.
In all three of these examples, the second-act disaster involves the collision of the perceived reality of the performers with an unexpected literality in the eye of their beholders. This causes distress on both sides of the footlights, a uniquely modern brand of suffering caused by fantasy closely resembling reality, and by reality being exactly as dangerous as fantasy.
What happens in the third act of these films, of course, is that these performers make the intentional choice to stay "crossed over," to find a way to bring their meager-yet-conveniently-specific skills learned in the service of storytelling to bear on the real-world problem at hand. That is how the plots get resolved.
There is another subcategory to be discussed that starts more or less where these movies end, with the performers deciding to take intentional steps across the border between fantasy and reality in order to accomplish a specific purpose. This is where things get complicated:
Type II: "We're not like those assholes in the movies."
The Hard Way is an under-remembered 1991 film (ranked only by about a thousand Flickchart users) that features Michael J. Fox as a blockbuster star who rides along with a grizzled NYPD detective as a means to research an upcoming dramatic turn. He is so farcically unconcerned with the difficult realities of police work and so used to seeing himself as a hero that he quickly assumes that his ability to "act like a policeman" would make him as effective in the field as an actual policeman. The third act eventually makes this true, but up until that point we have a situation where we see how the magic of movies has distorted the character's understanding of reality. And this isn't just a result of watching movies on the screen; this is a distortion brought on by the attendant culture which surrounds and supports the making of movies.
This fantasy of an actor crossing from artifice back to the real world and finding (or assuming) that they've brought useful skills with them is one that you can see echoes of in subplots of Gosford Park and Team America: World Police. It is a less common but deeper and more pathological confusion than Type I. The central farce of these stories is not a class-based or cultural misunderstanding of medium, but rather an exposé of the transformative effect (not always for the better) of working in the craft of fantasy, and also, indirectly, the fragility of the human soul in such a craft.
We see the full spectrum of this impact in Tropic Thunder, where a band of actors playing special forces soldiers fluctuate between being empowered by every actor's ability to crush doubt under the boot of audacity, and being crippled by every actor's gaping internal emotional maws.
And this door swings both ways too: Kiss Kiss Bang Bang is about a real-life criminal who leverages his familiarity with crime and violence into an actual part in a crime movie. Get Shortyis about a real-life loan shark whose experiences dealing with lowlifes and other desperate creatures makes him uniquely suited to a life in Hollywood as well as a source for cinematic tales that no mere screenwriter could invent.
In all these Type II examples, we get stories set in a world of "perfect information" where everyone is familiar with the difference between fantasy and reality but unsure (or at least conflicted) about how to reconcile them in an ordinary life.
The next type continues our journey to the other end of the spectrum, where those who are living the fantasy don't realize it at all... until one day they do.
Type III: "If the dog believes it, the audience believes it."
Bolt doesn't know he's an actor. He thinks he's a canine superhero. Buzz Lightyear doesn't know he's a toy. He'll tell you at the drop of a cowboy hat that he is an intergalactic law enforcement officer on a mission to defeat a warlord.
Truman Burbank doesn't know that he's a "reality" star. He thinks he has the perfect suburban life, but something doesn't seem quite right. It's almost as if the visible world is not the entire story of creation. It's almost as if there's a more real version of reality out there somewhere.
The tragedy is that for these characters, there is a more real reality waiting for them. This is tragic on at least three levels. First, in order to attain a more authentic experience of life, they must undergo the heartbreak of disillusionment, a hellish new adolescence that forces them to unlearn what seemed like rock-solid axioms but which have now been undercut, leaving doubt and uncertainty in their place. Second, their newly discovered "reality" is almost always worse than the one that they just woke up from. (Notable, and fascinating, inversions to this rule are Bowfinger and The Game, where real people stroll unwittingly from reality into a fantasy; in their case, the real world is preferable, at least at first.)
The third component to this tragedy — and this is rarely shown on the screen, but I can't help thinking about it — is that doubt and uncertainty will almost surely become a permanent part of their lives. Their distrust of the evidence of their senses and in the word of authority figures (with which the real world is rife) will metastasize, eating into their ability to find new sources of joy to replace what they've lost.
For the rest of us, no matter how surreal or improbable events in our lives become, we know there is no blue-plaster sky we can sail out to beyond which we can expect more honest treatment by the forces of the universe. The best that we can do is tell ourselves stories about such a world.
Two final points are interesting to note about this vein of films running through the canon. First, for most of the films on this list, the collision between fantasy and reality is used as an engine for comedy. Very rarely do films take the route of Pagliacci and show that artifice can be toxic and even fatal to the human psyche. Usually we like to see the comedic juxtaposition and farcical misunderstandings that result from this kind of plot. What this suggests is that we are uncomfortable with the implications of the ideas and not yet ready to take them seriously.
The second observation I want to make is that in all three of these types, the specific fantasy under discussion is usually one that involves violence. With the exception of The Truman Show and Gosford Park, every film I've mentioned involves characters who either pretend to, or actually do, have a criminal, military, or law enforcement aspect, and that aspect is the keystone of their fantasy life, the nucleus of their character.
Lucky Day (the character) is a paid mercenary who open-carries. Buzz Lightyear honestly believes that he has the right — nay, the duty to end lives with his arm laser. The fantasy being played out in The Game involves being assaulted by paramilitary tactical units. Bolt is a weapon of mass destruction.
Violence is also something that we are not ready to take seriously. In fact, we will never be; violence is as antithetical to the healthy human experience as it is an inescapable component of it. The fact that we cannot reconcile this and other paradoxes in our natures is what prompts us to engage in fantasy as fully as we do, playing out in miniature, within little rectangles, the extremes and hidden corners of our inner lives made as big and colorful as possible, the better to closer inspect them. It was just a matter of time before the very nature of those fantasies became a existential conflict in its own right.
Toy Story (1995) - Global #73
The Truman Show (1998) - Global #279
Kiss Kiss, Bang Bang (2005) - Global #592
The Game (1997) - Global #823
Tropic Thunder (2008) - Global #979
Galaxy Quest (1999) - Global #1176
¡Three Amigos! (1986) - Global #1369
A Bug's Life (1998) - Global #1416
Gosford Park (2001) - Global #2157
Get Shorty (1995) - Global #2311
The Hard Way (1991) - Global #3562
Bolt (2008) - Global #4184