Proposing a new theory of fiction, this work reviews the confusion about perceived realism, metaphor, virtual worlds and the seemingly obvious distinction between what is true and what is false. The rise of new media, new technology, and creative products and services requires a new examination of what ‘real’ friends are, to what extent scientific novelty is ‘true’, and whether online content is merely ‘figurative’. In this transdisciplinary theory the author evaluates cognitive theories, philosophical discussion, and topics in biology and physics, and places these in the frameworks of computer science and literary theory. The interest of the reader is continuously challenged on matters of truth, fiction, and the shakiness of our belief systems.