The brain has image processing circuitry that shows you a best guess image of the present based on info seen at least a tenth of a second ago.

When shown two images in quick succession, one of a dot on the left of a screen and one with the dot on the right, the brain sees motion from left to right, even though there was none. The visual system has apparently constructed the scenario after it has been perceived, reconciling the jagged images by imputing motion.

In an experiment originated by Dr. Nijhawan, people watch an object pass a flashbulb. The timing is exact: the bulb flashes precisely as the object passes. But people perceive that the object has moved past the bulb before it flashes. Scientists argue that the brain has evolved to see a split second into the future when it perceives motion. Because it takes the brain at least a tenth of a second to model visual information, it is working with old information. By modeling the future during movement, it is “seeing” the present.

Dr. Changizi and his colleagues hold that it is a general principle the brain applies to a wide variety of illusions that trick the brain into sensing motion.

Usually the brain's visual simulation of the future helps you to understand the past, present, and future. But your conscious mind is constantly getting fed a projection based on older sensory input.

Do you think this generation of illusion by the mind is limited to what you see? I seriously doubt it. There are plenty of signs from the research literature that human brains fool themselves in all sorts of ways. People in negative moods seem to form more accurate memories than those in positive moods. Whether depressed people see themselves more or less accurately than non-depressed people is debated. My guess is the answer is it depends on the depth of the depression and which aspect of self-evaluation is in question.

Non-depressed people create an illusion of being in control when they do well in circumstances where they really have no control.

Individual subjects were placed in front of a panel with a green light, a yellow light and a spring loaded button, and were instructed to make the green light flash as often as possible. In one segment, they would win money every time the green light went on. In another, they would lose money when it didn't. A screen in the room showed their score. Afterward, subjects were asked how much control they had. … Among the "normal," non-depressed subjects, it depended on whether they were losing or making money. When they were winning money, they thought they had considerable control. … When they were losing money, they thought they had virtually no control. In other words, these subjects took credit for good scores and dished off blame when scores were poor. … The depressed subjects saw things differently. Whether they were winning or losing money, they tended to believe they had no control. And they were correct: the "game" was a fiction.

This desire to feel in control is probably adaptive. Even if one is not in absolute control believing and behaving as if one has some control over one's circumstances probably boosts survival by motivating people to act and to try to manipulate reality.