Conditional Reality

Look, I just don't think he could realistically swing a sword of that size...oh, yeah, I'm totally comfortable with the dragon...why do you ask?

Fiction is an art form and as such does not have to imitate life exactly.  In fact, most people prefer that their fiction does not imitate life too closely.  If we stop to consider the nature of what would be required for a man to run at close to the speed of light and then snatch up a villain without breaking the villain's neck, well the Flash just becomes a logistical nightmare.
Be that as it may, we do have our own set of personal rules as to what we are and are not willing to accept with a piece of fiction.  There are no hard and fast rules to this that I can divine, rather each person makes the decision for themselves based upon diverse factors including mood, 'scientific knowledge', and genre of work.  Authors, for example, create their own realities for their works, again taking genre into consideration.  When readers look for a work to enjoy within a particular genre, they too have a set, probably undeclared, of expectations that they bring with them.
A characteristic of this applied rules set is that it is unique to the individual such that each person has certain things they consider concrete with respect to reality and over which they are not willing to compromise.  I call this phenomenon Conditional Reality.
Here then is a practical example of Conditional Reality:
A player is playing a tabletop role playing game that is suspiciously familiar, we shall call it Castles and Giant Carnivorous Lizards.  The player, having just been hit by the 'electric breath' of an Azure Dragon, argues that it is unrealistic to have been hit (the player was no doubt killed by this 'breath attack') as the warrior standing next to him covered from head to toe in a skin of steel is a far more conductive target and the breath should have arced over to him instead.  He further ignores any arguments by the warrior to the plate being a Faraday Cage.  Now, let us observe that the player is willing to accept the following things that are not 'realistic':
1. Azure Dragons exist
2. That anything at all can 'breathe' electricity
3. That his Burglar is able to add more 'life' by gaining 'experience points' in a hierarchical level system that somehow makes him immune to arrows
Yet demands rigid application of reality to the notion of how this unrealistic lizard breathes its unrealistic breath.
That's conditional reality at its most egregious.  Usually I find it is more subtle, but at its most basic this illustrates the situation.

Conditional Reality is not strictly genre determined, but genre plays a significant part in how a person's Conditional Reality is determined.  The fantasy genre, whether it be in film, gaming or the written word inherently defies reality (although not as much as the Superhero genre), mostly through the use of magic and mythical monsters, but the fans and creators still employ a set of rules to keep things 'grounded'.  Any given person may decry something as being particularly unrealistic while totally ignoring the several other unrealistic things, hand-waving them as being 'magic' or 'poetically justified'.  Compare this to the Horror Genre.
The Horror Genre encompasses quite a range from simple thrillers to fully supernatural works, and therefore I can not provide a hard and fast rule any more than I could with fantasy, but by examples we can fathom a difference.  Most slasher films start with the initial premise that the antagonist is human.  This was certainly the case in Halloween, The Texas Chainsaw Massacre, and Friday the 13th.  By the 4th installment of the Friday the 13th franchise the plausibility underlying the antagonist was being stretched.  By the 6th film Jason was officially the walking dead, leading up to his being a body hopping snake-slug monster in the 9th film.  If one accepts that the villain is a reanimated walking corpse then one should also have no problem accepting some of the other less than realistic elements of the films, yet we find that viewers will often complain about an 'unrealistic' action on behalf of the victim or unrealistic 'kill' all while accepting the existence of a masked walking dead killer.  Similarly, the tone of the work sets up the conditions for reality, but personal expertise can alter perception.
When an author, screenwriter, game designer or other artistic creator type sits down to create, they set the rules for reality in the process.  The writer determines what is reality for the creation, but ultimately each person who experiences the work makes the individual decision of what to accept and what not to accept.  This may seem petty but it is part of the human condition.  I blame several factors, including personal experience, education, and expertise.  Expertise is probably the worst culprit.  By expertise, I mean something about which an individual, rightly or not, considers themselves an authority, if not the foremost authority IN THE WORLD.  Personal taste must also be considered, as there are times when we forgive something that normally we would not simply because the genre or work is pleasing to us on the whole.  Some arguments I have heard concerning this phenomenon also include the nature of the work itself.  Cartoons are particular in that they are immune to such Conditional Reality arguments.  People simply say "It's a cartoon" and assume that this nullifies any arguments to the contrary.  It does, actually.
Conditional Reality is neither right nor wrong, it simply is.  As I have stated previously it is a part of the human condition brought about by a number of factors.  Because fiction of any type requires that we willingly participate in the alternate reality of the fictional work, it is to be expected that the individual perceptions of those perceiving the fictional work can clash with both the intentions of the creator of the fiction and the perceptions of the others perceiving the work as well.  Let us say, for example, that I am an expert in a very small segment of history, such as the history of soda machines throughout the American historical landscape and someone else is an expert on diners.  We might both be completely willing to accept the existence of time travel via a nuclear powered sports car, but balk at presentations of 1955 in the Michael J. Fox classic, Back to the Future. 
So is it a problem, this Conditional Reality?  Well, yes it is, but only insomuch as it pertains to human interactions.  I don't mean to suggest that Conditional Reality makes one person better or worse than another, but rather that it is part of personality clashes and further that it seems confined to fictional concepts.  I suspect we can apply it outside of fictional concepts, but then we are talking about an entirely different post.  As stated above, we participate in a shared fictional reality when we read a novel or watch a non-documentary film.  This Conditional Reality can be a problem during heated debates on, say, the Internet.  Nothing is more brutal than two fans who are having a disagreement over some piece of lore from a fictional body of work.  When two such fans begin arguing it becomes apparent to an outsider that Conditional Reality is heavily involved.  In any such argument logical attempts are ultimately doomed as the nature of fandom is fanaticism, which requires no logical basis whatsoever, yet it is part of the human condition that we put great effort into justifying, scientifically, logically, or otherwise our unrealities.  If you have any doubts about this think only of the numbers of technical manuals written for Star Trek and Star Wars properties, or any of the number of Wikipedia articles that explain the science behind fictional concepts.  The problem arises only when individual perceptions clash to the point that the participants engage in uncivil behavior, in which case we see that the Conditional Reality of the individuals involved does become a factor leading to the increased bad feelings.  When one person claims with all sincerity that another person is an idiot because the second person fails to accept the logical position of the first person when the first person is failing to realize that they are forcing their own Conditional Reality onto someone else's fictional concept, well that's when human perception is indeed a problem.  This is also a problem in RPGs when two people have a rules dispute over one person's supposed 'expertise' on a subject, usually amounting to bad feelings and dice throwing.  Again, perception is, I believe, at the root, as we all have our own views about reality and what we are willing to accept in a shared reality such as a fictional work or game.  We look for internal logic and consistency and we will allow style to override logic when it is good style or particularly entertaining.  By understanding that such Conditional Reality exists we can, hopefully, circumvent its pitfalls when we are faced with it in overwhelming amounts.
But hey, it's all a bit of fun, right?